STOCK-BASED COMPENSATION

12 Months Ended

Oct. 30, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Note L

STOCK-BASED COMPENSATION

The Company issues stock options and nonvested shares as part of its stock incentive plans for employees and non-employee directors. 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 periods ranging from six months to four years and expire ten years after the date of the grant. The Company recognizes stock-based compensation expense ratably over the shorter of the requisite service period or vesting period. The fair value of stock-based compensation granted to retirement-eligible individuals is expensed at the time of grant.

During the first quarter of fiscal 2007, the Company made a one-time grant of 100 stock options (pre-split) to each active, full-time employee of the Company on January 8, 2007. This grant was to vest upon the earlier of five years or attainment of closing stock price of $50.00 per share (pre-split) for five consecutive trading days, and had an expiration of ten years after the grant date. During the first quarter of fiscal 2011, the options vested after the stock attained the required closing price per share for five consecutive trading days.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of October 30, 2011, and changes during the fiscal year then ended, is as follows:

			Weighted-
		Weighted-	Average
		Average	Remaining	Aggregate
		Exercise	Contractual	Intrinsic
	Shares	Price	Term	Value
Outstanding at October 31, 2010	22,048	$16.47
Granted	2,658	24.96
Exercised	4,750	15.27
Forfeited	24	19.11
Outstanding at October 30, 2011	19,932	$ 17.89	5.7 yrs	$240,451
Exercisable at October 30, 2011	13,499	$ 16.66	4.5 yrs	$179,436

The weighted-average grant date fair value of stock options granted and the total intrinsic value of options exercised (in thousands) during each of the past three fiscal years is as follows:

	Fiscal Year Ended
		October 30,	October 31,	October 25,
		2011	2010	2009
Weighted-average grant date fair value		$   5.54	$    4.55	$ 2.93
Intrinsic value of exercised options		$54,859	$32,378	$5,049

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:

	Fiscal Year Ended
		October 30,	October 31,	October 25,
		2011	2010	2009
Risk-free interest rate		2.9%	3.4%	3.2%
Dividend yield		2.0%	2.2%	2.5%
Stock price volatility		21.0%	22.0%	22.0%
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 stripped U.S. Treasury yields as of the grant date where the remaining term is approximately the expected life of the option. The dividend yield is set 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 set 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 set 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 employee and non-employee director groups.

The Company’s nonvested shares granted on or before September 26, 2010, vest after five years or upon retirement. Nonvested shares granted after September 26, 2010, vest after one year. A reconciliation of the nonvested shares (in thousands) as of October 30, 2011, and changes during the fiscal year then ended is as follows:

		Weighted-
		Average
		Grant-Date
	Shares	Fair Value
Nonvested at October 31, 2010	206	$ 18.13
Granted	52	25.11
Vested	43	17.43
Nonvested at October 30, 2011	215	$ 19.94

The weighted-average grant date fair value of nonvested shares granted, the total fair value (in thousands) of non vested shares granted, and the fair value (in thousands) of shares that have vested during each of the past three fiscal years is as follows:

	Fiscal Year Ended
		October 30,	October 31,	October 25,
		2011	2010	2009
Weighted-average grant date fair value		$25.11	$19.56	$15.27
Fair value of nonvested shares granted		$1,299	$  978	$  865
Fair value of shares vested		$  751	$  664	$  204

Stock-based compensation expense, along with the related income tax benefit, for each of the past three fiscal years is presented in the table below:

	Fiscal Year Ended
		October 30,		October 31,		October 25,
(in thousands)		2011		2010		2009
Stock-based compensation expense recognized		$17,229		$14,402		$12,054
Income tax benefit recognized		(6,542	)	(5,510	)	(4,633	)
After-tax stock-based compensation expense		$10,687		$ 8,892		$ 7,421

At October 30, 2011, there was $12.3 million of total unrecognized compensation cost from stock-based compensation arrangements granted under the plans. This compensation is expected to be recognized over a weighted-average period of approximately 2.6 years. During fiscal years 2011, 2010, and 2009, cash received from stock option exercises was $53.8 million, $22.9 million, and $2.4 million, respectively. The total tax benefit to be realized for tax deductions from these option exercises was $20.8 million, $18.9 million, and $1.3 million, respectively.

Shares issued for option exercises and nonvested shares may be either authorized but unissued shares, or shares of treasury stock acquired in the open market or otherwise. The number of shares available for future grants was 32.6 million at October 30, 2011, 35.3 million at October 31, 2010, and 38.0 million at October 25, 2009.