Accounting for Sharebased Compensation

12 Months Ended

Nov. 29, 2014

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 shares, restricted stock units and deferred compensation. These equity awards fall under several plans and are described below. Starting in 2014 we no longer grant restricted stock shares.

Share-based Compensation Plans:We currently grant stock options and restricted stock unitsunder 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 33.3 percent 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.

Year 2013Master 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.

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. 

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.

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 option awards. The fair value of options granted during 2014, 2013 and 2012were calculated using the following assumptions:

	2014	2013	2012
Expected life (in years)	4.75	4.75	4.75
Weighted-average expected volatility	33.83%	47.28%	51.60%
Expected volatility range	31.61% - 37.06%	39.25% - 48.02%	48.79% - 51.76%
Risk-free interest rate	1.52%	0.77%	0.71%
Expected dividend yield	0.85%	0.87%	1.05%
Weighted-average fair value of grants	$13.82	$15.05	$11.52

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 $13,376, $12,317 and $9,728 for 2014, 2013 and 2012, respectively. 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 2014, 2013 and 2012, there was $3,357, $2,676 and $1,263 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 $18,799 at November 29, 2014 due to exercises of stock options, vesting of restricted stock and deferred compensation payouts in the year.

As of November 29, 2014, $7,303 of unrecognized compensation costs related to unvested stock option awards is expected to be recognized over a weighted-average period of 1.6 years. Unrecognized compensation costs related to unvested restricted stock shares was $3,426which is expected to be recognized over a weighted-average period of 1.0 years and unvested restricted stock units was $4,668 which is expected to be recognized over a weighted-average period of 0.9 years.

Share-based Activity

The option activity for the years ended November 29, 2014 and November 30, 2013 is summarized below:

			Weighted-
			Average
	Options		Exercise Price
Outstanding at December 1, 2012	2,429,750	$	21.63
Granted	493,173		40.07
Exercised	(462,427)		19.23
Forfeited or cancelled	(30,535)		28.57
Outstanding at November 30, 2013	2,429,961	$	25.74
Granted	477,606		48.06
Exercised	(330,179)		20.75
Forfeited or cancelled	(42,915)		38.59
Outstanding at November 29, 2014	2,534,473	$	30.39

The fair value of options granted during 2014, 2013 and 2012 was $6,599, $7,425 and $6,318, respectively. Total intrinsic value of options exercised during 2014, 2013 and 2012 was $8,915, $9,842 and $5,191, 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 November 29, 2014, November 30, 2013 and December 1, 2012 were $6,852, $8,891 and $7,401, respectively.

The nonvested restricted stock activity for the years ended November 29, 2014 and November 30, 2013, is summarized below:

						Weighted-
					Weighted-	Average
					Average	Remaining
					Grant	Contractual
					Date Fair	Life
	Units	Shares	Total		Value	(in Years)
Nonvested at December 1, 2012	141,184	245,231	386,415	$	25.41	0.9
Granted	62,701	186,352	249,053		39.66	1.7
Vested	(66,446)	(113,411)	(179,857)		37.85	-
Forfeited	(2,208)	(5,727)	(7,935)		32.17	1.4
Nonvested at November 30, 2013	135,231	312,445	447,676	$	33.76	1.2
Granted	126,536	-	126,536		48.84	1.2
Vested	(68,293)	(114,044)	(182,337)		48.16	-
Forfeited	(4,813)	(9,779)	(14,592)		37.80	1.1
Nonvested at November 29, 2014	188,661	188,622	377,283	$	40.70	1.0

Total fair value of restricted stock vested during 2014, 2013, and 2012 was $8,782, $6,807 and $4,626, respectively. The total fair value of nonvested restricted stock at November 29, 2014 was $15,354.

We repurchased 67,593, 62,124 and 54,289 restricted stock shares during 2014, 2013 and 2012, 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 November 29, 2014and November 30, 2013 is summarized below:

	Non-employee
	Directors	Employees	Total
Units outstanding December 1, 2012	338,769	68,662	407,431
Participant contributions	14,145	2,299	16,444
Company match contributions1	14,802	256	15,058
Payouts	(55,036)	(9,929)	(64,965)
Units outstanding November 30, 2013	312,680	61,288	373,968
Participant contributions	14,347	4,429	18,776
Company match contributions1	16,613	492	17,105
Payouts	(1,093)	(13,906)	(14,999)
Units outstanding November 29, 2014	342,547	52,303	394,850

¹ The non-employee directors’ company match includes 15,019 and 11,908 deferred compensation units paid as discretionary awards to all non-employee directors in 2014 and 2013, respectively.

The fair value of non-employee directors company matches for 2014, 2013 and 2012 was $130, $49 and $78, respectively. The fair value of the non-employee directors’ discretionary award was $720 for 2014, $480 for 2013 and $560 for 2012. The fair value of employee company matches was $19 for 2014 and $8 for 2013 and $14 for 2012.