Note 9 - Accounting for Share-based Compensation

12 Months Ended

Nov. 30, 2024

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

Note 9: 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 units, performance awards and deferred compensation. These equity awards fall under several plans and are described below.

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 the 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 include grants of 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. Time-based restricted stock awards generally vest beginning one year from the date of grant or 33.3 percent per year for three years, depending on the grant. Performance-based restricted stock awards vest three years from the date of grant. During the vesting period, ownership of the shares cannot be transferred.

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 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. Awards granted to retirement-eligible employees are forfeited if the retirement-eligible employees retire prior to 180 days after the grant. Accordingly, the related compensation expense is recognized during the 180 day period 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.

2020 Master Incentive Plan

This plan allows for granting of awards to any employee, officer, non-employee director, consultant, independent contractor or advisor providing services to us or any of our affiliates, or any person to whom an offer of employment or engagement with us or any of our affiliates has been made. The plan permits granting of (a) stock options; (b) stock appreciation rights; (c) restricted stock and restricted stock units; (d) performance awards; (e) dividend equivalents; (f) other awards based on our common stock, including shares for amounts employees or non-employee directors deferred under the deferred compensation plans. There were 2,854,679 common shares available for grant as of November 30, 2024.

2018 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 and restricted stock units; (d) performance awards; (e) dividend equivalents; (f) other awards based on our common stock, including shares for amounts employees deferred under the Key Employee Deferred Compensation Plan.

Year 2016 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 2024, 2023 and 2022 were calculated using the following assumptions:

	2024			2023			2022
Expected life (in years)		5.86			5.00			5.00
Weighted-average expected volatility		35.12	%		35.28	%		33.35	%
Expected volatility range		33.88-35.14	%		35.09-35.69	%		33.33-34.34	%
Risk-free interest rate		3.73-4.58	%		3.48-4.72	%		1.53-4.06	%
Weighted-average expected dividend		1.13	%		1.20	%		0.95	%
Expected dividend yield range		1.03-1.19	%		1.13-1.22	%		0.94-1.23	%
Weighted-average fair value of grants	$	28.07		$	22.41		$	20.91

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 closing stock price on the date of grant.

Expense

We use the straight-line attribution method to recognize share-based compensation expense for option awards and restricted stock units with graded and cliff vesting. Incentive stock options and performance awards are based on certain performance-based metrics and the expense is adjusted quarterly, based on our projections of the achievement of those metrics. The amount of share-based compensation expense recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. The 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 $21,914, $19,911 and $24,368 for 2024, 2023 and 2022, respectively. All share-based compensation was recorded as SG&A expense.

As of November 30, 2024, $9,499 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 units was $9,944 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 30, 2024, December 2, 2023, and December 3, 2022 is summarized below:

				Weighted-
				Average
	Options			Exercise Price
Outstanding at November 27, 2021		4,972,392		$	47.45
Granted		549,458			72.75
Exercised		(657,789	)		45.79
Forfeited or cancelled		(40,991	)		61.31
Outstanding at December 3, 2022		4,823,070			50.42
Granted		471,975			68.27
Exercised		(314,832	)		46.43
Forfeited or cancelled		(38,328	)		63.52
Outstanding at December 2, 2023		4,941,885			52.28
Granted		470,748			77.77
Exercised		(746,892	)		48.10
Forfeited or cancelled		(60,637	)		64.07
Outstanding at November 30, 2024		4,605,104			55.40

The fair value of options granted during 2024, 2023 and 2022 was $13,214, $10,577 and $5,400, respectively. Total intrinsic value of options exercised during 2024, 2023 and 2022 was $25,258, $8,015 and $16,877, respectively. For options outstanding at November 30, 2024, the weighted-average remaining contractual life was 5.3 years and the aggregate intrinsic value was $99,352. There were 3,756,728 options exercisable at November 30, 2024, with a weighted-average remaining contractual life of 4.6 years and an aggregate intrinsic value of $96,416. 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 30, 2024, December 2, 2023, and December 3, 2022 were $35,927, $14,619 and $30,122, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of stock options for 2024, 2023 and 2022 was $6,114, $1,885 and $3,687, respectively.

Restricted Stock Unit Activity

The nonvested restricted stock unit activity for the years ended  November 30, 2024, December 2, 2023, and December 3, 2022 is summarized below:

						Weighted-
				Weighted-		Average
				Average		Remaining
				Grant		Contractual
				Date Fair		Life
	Units			Value		(in Years)
Nonvested at November 27, 2021		552,365		$	50.63		1.9
Granted		179,603			67.92
Vested		(172,474	)		46.74
Forfeited		(68,374	)		45.83
Nonvested at December 3, 2022		491,120			58.98		0.7
Granted		187,185			63.32
Vested		(113,339	)		53.83
Forfeited		(36,276	)		44.48
Nonvested at December 2, 2023		528,690			62.61		0.7
Granted		194,689			73.34
Vested		(297,035	)		57.32
Forfeited		(15,603	)		70.61
Nonvested at November 30, 2024		410,741			71.21		0.9

Total fair value of restricted stock units vested during 2024, 2023, and 2022 was $17,027, $6,101 and $8,062, respectively. The total fair value of nonvested restricted stock at  November 30, 2024 was $29,250.

We indirectly repurchased 100,560, 37,715 and 55,081 shares during 2024, 2023 and 2022, respectively, through a net-settlement feature in connection with the statutory minimum tax withholding related to vesting of restricted stock. The Company’s actual tax benefits realized for the tax deductions related to the restricted stock vested for 2024, 2023 and 2022 was $4,237, $1,396 and $2,569, respectively.

Deferred Compensation Activity

Deferred compensation units are fully vested at the date of contribution. The deferred compensation units outstanding for the years ended  November 30, 2024, December 2, 2023, and December 3, 2022 is summarized below:

	Non-employee
	Directors			Employees			Total
Units outstanding November 27, 2021		468,524			48,361			516,885
Participant contributions		89,054			12,985			102,039
Company match contributions1		26,843			1,299			28,142
Payouts		(118,429	)		(6,073	)		(124,502	)
Units outstanding December 3, 2022		465,992			56,572			522,564
Participant contributions		13,187			12,219			25,406
Company match contributions1		18,899			1,222			20,121
Payouts		(102,108	)		(6,826	)		(108,934	)
Units outstanding December 2, 2023		395,970			63,187			459,157
Participant contributions		13,103			9,309			22,412
Company match contributions1		15,236			931			16,167
Payouts		(20,691	)		(8,357	)		(29,048	)
Units outstanding November 30, 2024		403,618			65,070			468,688

¹ The non-employee directors’ company match includes 13,926, 17,580 and 17,937 deferred compensation units paid as discretionary awards to all non-employee directors in 2024, 2023 and 2022, respectively.

The fair value of non-employee directors’ company matches for 2024, 2023 and 2022 was $182, $172 and $172, respectively. The fair value of the non-employee directors’ discretionary award was $1,200, $1,200 and $1,080 for 2024, 2023 and 2022, respectively. The fair value of employee company matches was $78, $79 and $86 for 2024, 2023 and 2022, respectively.