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 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.

A reconciliation of the number of options outstanding and exercisable (in thousands) as of October 30, 2016, 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 25, 2015	34,397	$ 13.83
Granted	2,128	38.31
Exercised	4,502	9.60
Forfeited	25	22.03
Outstanding at October 30, 2016	31,998	$ 16.05	4.8 yrs	$ 710,346
Exercisable at October 30, 2016	25,112	$ 12.88	3.9 yrs	$ 636,449

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 25,	October 26,
	2016	2015	2014
Weighted-average grant date fair value	$ 7.82	$ 4.92	$ 4.85
Intrinsic value of exercised options	$ 135,593	$ 67,516	$ 74,972

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 25,	October 26,
	2016	2015	2014
Risk-free interest rate	2.1%	2.1%	2.5%
Dividend yield	1.5%	1.9%	1.8%
Stock price volatility	19.0%	19.0%	20.0%
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.

Nonvested shares vest on the earlier of the day before the Company’s next annual meeting date or one year. A reconciliation of the nonvested shares (in thousands) as of October 30, 2016, and changes during the fiscal year then ended, is as follows:

		Weighted-
		Average
		Grant Date
	Shares	Fair Value
Nonvested at October 25, 2015	74	$ 25.87
Granted	47	41.01
Vested	74	25.87
Nonvested at October 30, 2016	47	$ 41.01

The weighted-average grant date fair value of nonvested shares granted, the total fair value (in thousands) of nonvested 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 25,	October 26,
	2016	2015	2014
Weighted-average grant date fair value	$ 41.01	$ 25.87	$ 22.06
Fair value of nonvested shares granted	$ 1,920	$ 1,920	$ 1,760
Fair value of shares vested	$ 1,920	$ 2,347	$ 2,085

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 25,	October 26,
(in thousands)	2016	2015	2014
Stock-based compensation expense recognized	$ 17,829	$ 15,717	$ 14,393
Income tax benefit recognized	(6,764)	(5,967)	(5,469)
After-tax stock-based compensation expense	$ 11,065	$ 9,750	$ 8,924

At October 30, 2016, there was $9.9 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 2.5 years. During fiscal years 2016, 2015, and 2014, cash received from stock option exercises was $12.1 million, $10.5 million, and $10.5 million, respectively. The total tax benefit to be realized for tax deductions from these option exercises was $51.6 million, $25.6 million, and $28.4 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 48.1 million at October 30, 2016, 50.1 million at October 25, 2015, and 53.2 million at October 26, 2014.