Note

: Accounting for Share-Based Compensation

Overview:

We have various share-based compensation programs, which provide for equity awards including non-qualified stock options, incentive 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 units under equity compensation and deferred compensation plans.

Stock options are granted to officers and key employees at prices not less than fair market value at the date of grant. Non-qualified stock options are generally exercisable beginning one year from the date of grant in cumulative yearly amounts of 33.3 percent. Incentive stock options are based on certain performance based criteria and are generally exercisable at a stated date when the performance criteria is measured. Stock options 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 beginning one year 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.

We are required to recognize compensation expense when an employee is eligible to retire. We consider employees eligible to retire at age 55 and after 10 years of service. Accordingly, the related compensation expense is recognized immediately for awards granted to retirement eligible employees or over the period from the grant date to the date retirement eligibility is achieved, if less than the stated vesting period.

Year

Master

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 2015, 2014 and 2013 were calculated using the following assumptions:

	2015					2014					2013
Expected life (in years)		4.62					4.75					4.75
Weighted-average expected volatility		30.81			%		33.83			%		47.28			%
Expected volatility range		25.50%	-	31.67	%		31.61%	-	37.06	%		39.25%	-	48.02	%
Risk-free interest rate		1.27			%		1.52			%		0.77			%
Expected dividend yield		1.12			%		0.85			%		0.87			%
Weighted-average fair value of grants	$	10.05				$	13.82				$	15.05

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 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 $14,156, $13,376 and $12,317 for 2015, 2014 and 2013, respectively. All share-based compensation was recorded as SG

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 2015, 2014 and 2013, there was $1,433, $3,357 and $2,676 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 $20,180 at November 28, 2015 due to exercises of stock options, vesting of restricted stock and deferred compensation payouts in the year.

As of November 28, 2015, $7,232 of unrecognized compensation costs related to unvested stock option awards is expected to be recognized over a weighted-average period of 1.1 years. Unrecognized compensation costs related to unvested restricted stock shares was $840 which is expected to be recognized over a weighted-average period of 0.5 years and unvested restricted stock units was $5,609 which is expected to be recognized over a weighted-average period of 0.9 years.

Stock Option

Activity

The stock option activity for the years ended November 28, 2015 and November 29, 2014 is summarized below:

				Weighted-
				Average
	Options			Exercise Price
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

Granted		759,167			40.69
Exercised		(275,035	)		22.67
Forfeited or cancelled		(106,532	)		42.42
Outstanding at November 28, 2015		2,912,073		$	33.37

The fair value of options granted during 2015, 2014 and 2013 was $7,632, $6,599 and $7,425, respectively. Total intrinsic value of options exercised during 2015, 2014 and 2013 was $5,327, $8,915 and $9,842, 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 28, 2015, November 29, 2014 and November 30, 2013 were $4,631, $6,852 and $8,891, respectively.

The nonvested restricted stock activity for the years ended November 28, 2015 and November 29, 2014, is summarized below:

	Units			Shares			Total			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Life (in Years)
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

Granted		144,100			-			144,100			40.92		1.2
Vested		(82,495	)		(69,152	)		(151,647	)		37.47		-
Forfeited		(13,253	)		(9,310	)		(22,563	)		40.66		0.8
Nonvested at November 28, 2015		237,013			110,160			347,173		$	42.17		0.8

Total fair value of restricted stock vested during 2015, 2014, and 2013 was $6,192, $8,782 and $6,807, respectively. The total fair value of nonvested restricted stock at November 28, 2015 was $14,639.

We repurchased 54,454, 67,593 and 62,124 restricted stock shares during 2015, 2014 and 2013, 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 28, 2015 and November 29, 2014 is summarized below:

	Non-employee Directors			Employees			Total
Units outstanding November 30, 2013		312,680			61,288			373,968
Participant contributions		14,347			4,429			18,776
Company match contributions 1		16,613			492			17,105
Payouts		(1,093	)		(13,906	)		(14,999	)
Units outstanding November 29, 2014		342,547			52,303			394,850

Participant contributions		16,312			4,705			21,017
Company match contributions 1		21,636			470			22,106
Payouts		(325	)		(11,572	)		(11,897	)
Units outstanding November 28, 2015		380,170			45,906			426,076

The non-employee directors’ company match includes 20,005 and 15,019 deferred compensation units paid as discretionary awards to all non-employee directors in 2015 and 2014, respectively.

The fair value of non-employee directors’ company matches for 2015, 2014 and 2013 was $122, $130 and $49, respectively. The fair value of the non-employee directors’ discretionary award was $800 for 2015, $720 for 2014 and $480 for 2013. The fair value of employee company matches was $17 for 2015 and $19 for 2014 and $8 for 2013.