STOCK-BASED COMPENSATION

9 Months Ended

Jul. 26, 2020

Share-based Payment Arrangement [Abstract]

The Company issues stock options, restricted stock units, and restricted shares as part of its stock incentive plans for employees and non-employee directors. During the thirteen and thirty-nine weeks ended July 26, 2020, stock-based compensation expense was $3.7 million and $19.2 million, respectively, compared to $3.2 million and $16.7 million for the thirteen and thirty-nine weeks ended July 28, 2019. The Company recognizes stock-based compensation expense ratably over the shorter of the vesting period or the individual's retirement eligibility date. The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

At July 26, 2020, there was $27.4 million of total unrecognized compensation expense from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 2.2 years. During the thirteen and thirty-nine weeks ended July 26, 2020, cash received from stock option exercises was $7.7 million and $72.1 million, respectively, compared to $3.8 million and $48.1 million for the thirteen and thirty-nine weeks ended July 28, 2019.

Shares issued for option exercises, restricted stock units, and restricted shares may be either authorized but unissued shares or shares of treasury stock.

Stock Options: The Company’s policy is to grant options with the exercise price equal to the market price of the common stock on the date of grant. Options typically vest over four years and expire ten years after the date of the grant.

Effective with fiscal 2020 grants, the Company has determined the equity award value for eligible employees will be delivered fifty percent in stock options as described above and fifty percent in time-vested restricted stock units with a three-year cliff vesting.

During the third quarter of fiscal 2018, the Company made a one-time grant of 200 stock options to each active, full-time employee and 100 stock options to each active, part-time employee of the Company on April 30, 2018. The options vest in five years and expire ten years after the grant date.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of July 26, 2020 is:



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Stock Options Outstanding at October 27, 2019	25,994	$	26.49
Granted	1,218	45.88
Exercised	5,362	15.62
Forfeited	185	36.35
Expired	1	36.25
Stock Options Outstanding at July 26, 2020	21,664	30.18		5.4	$	435,137
Stock Options Exercisable at July 26, 2020	14,707	$	25.85	4.1	$	359,098

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during the thirteen and thirty-nine weeks ended July 26, 2020, and July 28, 2019, are:



	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	July 26, 2020		July 28, 2019		July 26, 2020		July 28, 2019
Weighted-average Grant Date Fair Value ⁽¹⁾	$	7.22	$	—	$	7.71	$	9.24
Intrinsic Value of Exercised Options	13,254		7,308		167,148		115,094

⁽¹⁾ There were no stock options granted during the thirteen weeks ended July 28, 2019.

The fair value of each option award is calculated on the date of grant using the Black-Scholes valuation model utilizing the following weighted-average assumptions:



	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	July 26, 2020		July 28, 2019		July 26, 2020		July 28, 2019
Risk-free Interest Rate	0.7	%	—	%	1.7	%	2.8	%
Dividend Yield	1.9	%	—	%	2.0	%	1.9	%
Stock Price Volatility	19.0	%	—	%	19.0	%	19.0	%
Expected Option Life	8 years		—		8 years		8 years

As part of the annual valuation process, the Company reassesses the appropriateness of the inputs used in the valuation models. The Company establishes the risk-free interest rate using U.S. Treasury yields as of the grant date. The dividend yield is based on the dividend rate approved by the Company’s Board of Directors and the stock price on the grant date. The expected volatility assumption is based primarily on historical volatility. As a reasonableness test, implied volatility from exchange traded options is also examined to validate the volatility range obtained from the historical analysis. The expected life assumption is based on an analysis of past exercise behavior by option holders. In performing the valuations for option grants, the Company has not stratified option holders as exercise behavior has historically been consistent across all employees.

Restricted Stock Units: Restricted stock units are valued equal to the market price of the common stock on the date of grant and vest after three years. These awards accumulate dividend equivalents, which are provided as additional units and are subject to the same vesting requirements as the underlying grant.

A reconciliation of the restricted stock units (in thousands) as of July 26, 2020 is:



	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Restricted Stock Units Outstanding at October 27, 2019	—	$	—
Granted	205	45.88
Vested	14	45.54
Restricted Stock Units Outstanding at July 26, 2020	191	$	45.90	2.4	$	9,599

The weighted-average grant date fair value of restricted stock units granted and the total fair value (in thousands) of restricted stock units granted during the thirteen and thirty-nine weeks ended July 26, 2020, and July 28, 2019, are:



	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	July 26, 2020		July 28, 2019		July 26, 2020		July 28, 2019
Weighted-average Grant Date Fair Value	$	48.76	$	—	$	45.88	$	—
Fair Value of Restricted Stock Units Granted	63		—		9,383		—

Restricted Shares: Restricted shares awarded to non-employee directors annually on February 1 are subject to a restricted period which expires the date of the Company’s next annual stockholders meeting. Newly elected directors receive a prorated award of restricted shares of the Company's common stock, which expires on the date of the Company's second succeeding annual stockholders meeting. A reconciliation of the restricted shares (in thousands) as of July 26, 2020 is:



	Shares	Weighted- Average Grant Date Fair Value
Restricted Shares Outstanding at October 27, 2019	51	$	42.23
Granted	41	47.29
Vested	47	42.08
Restricted Shares Outstanding at July 26, 2020	45	$	47.03

The weighted-average grant date fair value of restricted shares granted, the total fair value (in thousands) of restricted shares granted, and the fair value (in thousands) of shares that have vested during the thirty-nine weeks ended July 26, 2020, and July 28, 2019, are:



	Thirty-Nine Weeks Ended
	July 26, 2020		July 28, 2019
Weighted-average Grant Date Fair Value	$	47.29	$	42.23
Fair Value of Restricted Shares Granted	1,973		2,134
Fair Value of Shares Vested	1,974		1,760