Best Buy 2016 Annual Report Download - page 88

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80
2016 2015 2014
Stock options $ 15 $ 17 $ 25
Share awards
Market-based 16 10 9
Time-based 73 60 62
Employee stock purchase plans — — 1
Total $ 104 $ 87 $ 97
Stock Options
Stock option activity was as follows in fiscal 2016:
Stock
Options
Weighted-Average
Exercise Price per
Share
Weighted-Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic Value
(in millions)
Outstanding at January 31, 2015 17,342,000 $ 36.81
Granted 1,267,000 $ 40.68
Exercised (1,432,000) $ 28.24
Forfeited/Canceled (2,935,000) $ 44.15
Outstanding at January 30, 2016 14,242,000 $ 36.51 4.7 $ 20
Vested or expected to vest at January 30, 2016 13,986,000 $ 36.47 4.6 $ 20
Exercisable at January 30, 2016 11,668,000 $ 37.09 3.8 $ 18
The weighted-average grant-date fair value of stock options granted during fiscal 2016, 2015 and 2014 was $11.59, $9.09 and
$7.77, respectively, per share. The aggregate intrinsic value of our stock options (the amount by which the market price of the
stock on the date of exercise exceeded the exercise price of the option) exercised during fiscal 2016, 2015 and 2014, was $14
million, $13 million and $39 million, respectively. At January 30, 2016, there was $15 million of unrecognized compensation
expense related to stock options that is expected to be recognized over a weighted-average period of 1.2 years.
Net cash proceeds from the exercise of stock options were $40 million, $42 million and $158 million in fiscal 2016, 2015 and
2014, respectively.
There was $5 million, $5 million and $13 million of income tax benefits realized from stock option exercises in fiscal 2016,
2015 and 2014, respectively.
In fiscal 2016, 2015 and 2014, we estimated the fair value of each stock option on the date of grant using a lattice or Black
Scholes valuation model (for certain individuals) with the following assumptions:
Valuation Assumptions(1) 2016 2015 2014
Risk-free interest rate(2) 0.1% – 2.1% 0.1% – 2.4% 0.1% – 1.8%
Expected dividend yield 2.3% 2.5% 2.0%
Expected stock price volatility(3) 37% 40% 46%
Expected life of stock options (in years)(4) 6.0 6.0 5.9
(1) Forfeitures are estimated using historical experience and projected employee turnover.
(2) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.
(3) In projecting expected stock price volatility, we consider both the historical volatility of our stock price as well as implied volatilities from exchange-
traded options on our stock.
(4) We estimate the expected life of stock options based upon historical experience.
Market-Based Share Awards
The fair value of market-based share awards is determined using Monte-Carlo simulation. A summary of the status of our
nonvested market-based share awards at January 30, 2016, and changes during fiscal 2016, is as follows: