Accounting for Sharebased Compensation

12 Months Ended

Dec. 01, 2012

Accounting for Share-based Compensation [Abstract]

Accounting for Share-based Compensation Disclosure

Note 3: Accounting for Share-Based Compensation

Overview:We have various share-based compensation programs, which provide for equity awards including stock options, restricted stock and deferred compensation. These equity awards fall under several plans and are described below.

Share-based Compensation Plans:We currently grant stock options, restricted stock and stock-based units under equity compensation and deferred compensation plans.

Non-qualified stock options are granted to officers and key employees at prices not less than fair market value at the date of grant. These non-qualified options are generally exercisable beginning one year from the date of grant in cumulative yearly amounts of 25 percent or 33.3percent and generally have a contractual term of 10 years. Options exercised represent newly issued shares.

Restricted stock awards are nonvested stock-based awards that may include grants of restricted stock shares or restricted stock units. Restricted stock awards are independent of option grants and are subject to forfeiture if employment terminates prior to the release of the restrictions. Such awards generally vest in threeyears from the date of grant or 33.3 percent per year for three years, depending on the grant. During the vesting period, ownership of the shares cannot be transferred.

Restricted stock shares granted represent newly issued shares and have the same cash dividend and voting rights as other common stock and are considered to be currently issued and outstanding. The cash dividends on restricted stock shares are forfeitable.

Restricted stock units have dividend equivalent rights equal to the cash dividend paid on restricted stock shares. However, restricted stock units do not have voting rights of common stock and are not considered issued and outstanding upon grant. Restricted stock units become newly issued shares when vested. The dividend equivalent rights for restricted stock units are forfeitable.

We expense the cost, which is the grant date fair market value, of both the restricted stock shares and the restricted stock units ratably over the period during which the restrictions lapse. The grant date fair value is our closing stock price on the date of grant.

Directors' Deferred Compensation Plan: This plan allows non-employee directors to defer all or a portion of their retainer and meeting fees in a number of investment choices, including units representing shares of our common stock. We provide a 10 percent match on deferred compensation invested in these units. These units are required to be paid out in our common stock.

2009 Directors' Stock Incentive Plan: This plan permits granting of (a) shares for amounts non-employee directors defer under the Directors' Deferred Compensation Plan and (b) discretionary grants of restricted stock, stock options, stock appreciation rights, performance awards and other stock awards. 

Year 2000 Stock Incentive Plan: This plan allows for granting of awards to employees. The plan permits granting of (a) stock options; (b) stock appreciation rights; (c) restricted stock awards; (d) performance awards; (e) dividend equivalents; and (f) other awards based on our common stock, including shares for amounts employees deferred under the Key Employee Deferred Compensation Plan.

Key Employee Deferred Compensation Plan: This plan allows key employees to defer a portion of their eligible compensation in a number of investment choices, including units representing shares of company common stock. We provide a 10 percent match on deferred compensation invested in these units.

Grant-Date Fair Value:We use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock optionawards. The fair value of options granted during 2012, 2011 and 2010 were calculated using the following assumptions:

	2012	2011	2010
Expected life (in years)	4.75	4.75	5
Weighted-average expected volatility	51.60%	52.13%	50.88%
Expected volatility range	48.79% - 51.76%	50.45% - 52.30%	50.80% - 51.60%
Risk-free interest rate	0.71%	1.87%	2.07%
Expected dividend yield	1.05%	1.31%	1.35%
Weighted-average fair value of grants	$11.52	$9.10	$8.49

Expected life – We use historical employee exercise and option expiration data to estimate the expected life assumption for the Black-Scholes grant-date valuation. We believe that this historical data is currently the best estimate of the expected term of a new option. We use a weighted-average expected life for all awards.

Expected volatility – Volatility is calculated using our stock's historical volatility for the same period of time as the expected life. We have no reason to believe that its future volatility will differ from the past.

Risk-free interest rate – The rate is based on the U.S. Treasury yield curve in effect at the time of the grant for the same period of time as the expected life.

Expected dividend yield – The calculation is based on the total expected annual dividend payout divided by the average stock price.

Expense

We use the straight-line attribution method to recognize expense for all option awards with graded vesting and restricted stock awards with graded and cliff vesting. Expense is recognized over the requisite service period, which for us is the period between the grant date and the earlier of the award's stated vesting term or the date the employee is eligible for early vesting based on the terms of the plans.

Total share-based compensation expense was $9,728, $7,741 and $6,405 for 2012, 2011 and 2010, respectively. No share-based compensation was capitalized. All share-based compensation was recorded as selling, general and administrative expense.

The benefits of tax deductions in excess of recognized compensation costs (excess tax benefits) are recorded as a financing cash inflow rather than a deduction of taxes paid. For 2012, 2011 and 2010, there was $1,263, $1,140 and $509 of excess tax benefit recognized resulting from share-based compensation cost, respectively. Our additional paid in capital pool (“APIC Pool”) of excess tax benefits available to absorb tax deficiencies was $12,826 at December 1, 2012 due to exercises of stock options, vesting of restricted stock and deferred compensation payouts in the year.

As of December 1, 2012, $6,096 of unrecognized compensation costs related to unvested stock option awards is expected to be recognized over a weighted-average period of 1.4 years. Unrecognized compensation costs related to unvested restricted stock awards are $5,657 as of December 1, 2012 and are expected to be recognized over a weighted-average period of 0.9 years.

Share-based Activity

The option activity for the years ended December 1, 2012 and December 3, 2011 is summarized below:

			Weighted-
			Average
	Options		Exercise Price
Outstanding at November 27, 2010	2,820,468	$	18.25
Granted	535,873		22.11
Exercised	(538,709)		14.75
Forfeited or cancelled	(394,266)		21.87
Outstanding at December 3, 2011	2,423,366	$	19.29
Granted	548,449		28.75
Exercised	(430,000)		17.42
Forfeited or cancelled	(112,065)		22.03
Outstanding at December 1, 2012	2,429,750	$	21.63

The fair value of options granted during 2012, 2011 and 2010 was $6,318, $4,878 and $5,327, respectively. Total intrinsic value of options exercised during 2012, 2011 and 2010 was $5,191, $4,231 and $3,542, respectively. Intrinsic value is the difference between our closing stock price on the respective trading day and the exercise price, multiplied by the number of options exercised. Proceeds received from option exercises during the year ended December 1, 2012 were $7,401.

The nonvested restricted stock activity for the years ended December 1, 2012 and December 3, 2011, is summarized below:

						Weighted-
					Weighted-	Average
					Average	Remaining
					Grant	Contractual
					Date Fair	Life
	Units	Shares	Total		Value	(in Years)
Nonvested at November 28, 2010	111,940	365,829	477,769	$	19.17	1.7
Granted	82,492	145,038	227,530		22.38	2.2
Vested	(54,392)	(148,951)	(203,343)		21.87	-
Forfeited	(12,923)	(90,154)	(103,077)		18.59	1.1
Nonvested at December 3, 2011	127,117	271,762	398,879	$	23.18	1.0
Granted	88,536	128,427	216,963		28.64	2.2
Vested	(52,788)	(134,810)	(187,598)		24.66	-
Forfeited	(21,681)	(20,148)	(41,829)		24.78	1.6
Nonvested at December 1, 2012	141,184	245,231	386,415	$	25.41	0.9

Total fair value of restricted stock vested during 2012, 2011, and 2010 was $4,626, $4,447 and $1,441, respectively. The total fair value of nonvested restricted stock at December 1, 2012 was $9,820.

We repurchased 54,289, 48,675 and 17,804 restricted stock shares during 2012, 2011 and 2010, respectively, in conjunction with restricted stock share vestings. The repurchases relate to statutory minimum tax withholding.

Deferred compensation units are fully vested at the date of contribution. The deferred compensation units outstanding for the years ended December 1, 2012and December 3, 2011 is summarized below:

	Non-employee
	Directors	Employees	Total
Units outstanding November 27, 2010	277,345	88,798	366,143
Participant contributions	21,406	3,457	24,863
Company match contributions1	22,996	649	23,645
Payouts	(7,187)	(15,631)	(22,818)
Units outstanding December 3, 2011	314,560	77,273	391,833
Participant contributions	15,836	3,215	19,051
Company match contributions1	20,414	599	21,013
Payouts	(12,041)	(12,425)	(24,466)
Units outstanding December 1, 2012	338,769	68,662	407,431

1 The non-employee directors' company match includes 18,030and 19,452 deferred compensation units paid as discretionary awards to all non-employee directors in 2012 and 2011, respectively.

The fair value of non-employee directors company matches for 2012, 2011 and 2010 was $78, $78 and $66, respectively. The fair value of the non-employee directors' discretionary award was $560 for 2012 and $490 for 2011 and 2010. The fair value of employee company matches was $14 for 2012 and $14for 2011 and $15 for 2010.