Stock-Based Compensation

3 Months Ended

Nov. 30, 2019

Note 4. Stock-Based Compensation

The Company accounts for all share-based payments in accordance with ASC Topic 718, “Compensation—Stock Compensation,” as subsequently amended. Stock-based compensation expense included in operating expenses for the thirteen-week periods ended November 30, 2019 and December 1, 2018 was as follows:


	Thirteen Weeks Ended
	November 30,		December 1,
	2019		2018
	(Dollars in thousands)
Stock options	$	975	$	1,205
Restricted share awards		205		532
Restricted stock units		2,876		2,365
Performance share units		46		—
Associate Stock Purchase Plan		59		72
Total		4,161		4,174
Deferred income tax benefit		(1,040)		(1,048)
Stock-based compensation expense, net	$	3,121	$	3,126

Stock options

The Company discontinued its grants of stock options in fiscal 2020. For the thirteen weeks ended December 1, 2018, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:


	Thirteen Weeks Ended
	December 1,
	2018
Expected life (in years)	4.0
Risk-free interest rate	2.98	%
Expected volatility	23.13	%
Expected dividend yield	2.70	%
Weighted-average grant-date fair value	$14.05

A summary of the Company’s stock option activity for the thirteen-week period ended November 30, 2019 is as follows:


	Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding on August 31, 2019	1,894	$	74.73
Granted	—		—
Exercised	(73)		61.96
Canceled/Forfeited	(19)		81.94
Outstanding on November 30, 2019	1,802	$	75.17	3.9	$	5,608
Exercisable on November 30, 2019	1,227	$	73.05	3.2	$	5,375

The unrecognized share-based compensation cost related to stock option expense at November 30, 2019 was $6,709 and will be recognized over a weighted average period of 2.2 years. The total intrinsic value of options exercised, which represents the difference between the exercise price and market value of common stock measured at each individual exercise date, during the thirteen-week periods ended November 30, 2019 and December 1, 2018 was $941 and $618, respectively.

Performance share units

Beginning with the thirteen-week period ended November 30, 2019, the Company grants performance share units (“PSU”) as part of its long-term stock-based compensation program. PSUs cliff vest after a three year performance period

based on achievement of specific performance goals. Based on the extent to which the targets are achieved, vested shares may range from zero to 200 percent of the target award amount. PSUs accrue dividend equivalents (in the form of additional stock units) that are payable upon, and to the same extent as, the vesting of the underlying PSUs.

The following table summarizes all transactions related to PSUs under the Company’s 2015 Omnibus Incentive Plan (based on target award amounts) for the thirteen weeks ended November 30, 2019:


	Shares	Weighted-Average Grant-Date Fair Value
Non-vested PSUs at August 31, 2019	—	$	—
Granted	31		76.32
Vested	—		—
Canceled/Forfeited	—		—
Non-vested PSUs at November 30, 2019 ⁽¹⁾	31	$	76.32
⁽¹⁾ Excludes less than 1 share of accrued incremental dividend equivalent rights on outstanding PSUs granted under the Company's 2015 Omnibus Incentive Plan.

The fair value of each PSU is the closing stock price on the NYSE of the Company’s Class A common stock on the date of grant. Upon vesting, subject to achievement of performance goals, a portion of the PSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining PSUs will be settled in shares of the Company’s Class A common stock when vested. These awards accrue dividend equivalents on the underlying PSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A common stock and these dividend equivalents are paid out in unrestricted common stock on the vesting dates of the underlying PSUs, subject to the same performance vesting requirements. The unrecognized share-based compensation cost related to the PSUs at November 30, 2019 was $2,311 and is expected to be recognized over a period of 2.9 years.

Restricted share awards

A summary of the non-vested restricted share award (“RSA”) activity under the Company’s 2005 Omnibus Incentive Plan and 2015 Omnibus Incentive Plan for the thirteen-week period ended November 30, 2019 is as follows:


	Shares	Weighted-Average Grant-Date Fair Value
Non-vested RSAs at August 31, 2019	21	$	82.00
Granted	—		—
Vested	(19)		83.01
Canceled/Forfeited	—		—
Non-vested RSAs at November 30, 2019	2	$	72.06

The fair value of each RSA is the closing stock price on the NYSE of the Company’s Class A common stock on the date of grant. Upon vesting, a portion of the RSA award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSAs will be settled in shares of the Company’s Class A common stock when vested. The unrecognized share-based compensation cost related to RSAs at November 30, 2019 was $66 and will be recognized over a weighted average period of 0.5 years.

Restricted stock units

A summary of the Company’s non-vested Restricted Stock Unit (“RSU”) award activity under the Company’s 2015 Omnibus Incentive Plan for the thirteen-week period ended November 30, 2019 is as follows:


	Shares	Weighted-Average Grant-Date Fair Value
Non-vested RSUs at August 31, 2019	416	$	76.93
Granted	218		76.32
Vested	(110)		73.19
Canceled/Forfeited	(8)		78.12
Non-vested RSUs at November 30, 2019 ⁽¹⁾	516	$	77.46
⁽¹⁾ Excludes approximately 22 shares of accrued incremental dividend equivalent rights on outstanding RSUs granted under the Company's 2015 Omnibus Incentive Plan.

The fair value of each RSU is the closing stock price on the NYSE of the Company’s Class A common stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s Class A common stock when vested. These awards accrue dividend equivalents on the underlying RSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A common stock and these dividend equivalents are paid out in unrestricted common stock on the vesting dates of the underlying RSUs. The unrecognized share-based compensation cost related to the RSUs at November 30, 2019 was $36,672 and is expected to be recognized over a weighted average period of 3.4 years.