Stock-Based Compensation Plans

12 Months Ended

Oct. 31, 2020

Share-based Payment Arrangement [Abstract]


10			Stock-Based Compensation Plans

The company maintains the 2010 plan for executive officers, other employees, and non-employee members of the company's Board. The 2010 plan allows the company to grant stock-based compensation awards to such individuals, including unrestricted common stock awards, stock options, restricted stock units, restricted stock, and performance share awards. The number of unissued shares of common stock available for future stock-based compensation award grants under the 2010 plan was 3,740,799 as of October 31, 2020. Shares of common stock issued upon the exercise, vesting, or

settlement of stock options, restricted stock units, and performance shares are issued from treasury shares.

Compensation costs related to stock-based compensation awards were as follows (in thousands):


Fiscal Years Ended October 31	2020		2019		2018
Unrestricted common stock awards	$	693	$	592	$	530
Stock option awards	9,163		6,537		5,006
Performance share awards	2,123		3,070		3,628
Restricted stock unit awards	3,429		3,230		2,997
Total compensation cost for stock-based awards	$	15,408	$	13,429	$	12,161
Related tax benefit from stock-based awards	$	3,696	$	3,200	$	2,905

Unrestricted Common Stock Awards

During fiscal 2020, 2019, and 2018, 8,920, 10,090, and 8,388 shares, respectively, of fully vested unrestricted common stock awards were granted to certain non-employee members of the company's Board as a component of their compensation for their service on the Board and were recorded within selling, general and administrative expense in the Consolidated Statements of Earnings.

Stock Option Awards

Under the 2010 plan, stock options are granted with an exercise price equal to the closing price of the company's common stock on the date of grant, as reported by the New York Stock Exchange. Options are generally granted to executive officers, other employees, and non-employee members of the company's Board on an annual basis in the first quarter of the company's fiscal year. Options generally vest one-third each year over a three-year period and have a ten-year term. Other options granted to certain employees vest in full on the three-year anniversary of the date of grant and have a ten-year term. Compensation cost equal to the grant date fair value is generally recognized for these awards over the vesting period. Compensation cost recognized for other employees not considered executive officers and non-employee members of the company's Board is net of estimated forfeitures, which are determined at the time of grant based on historical forfeiture experience. Stock options granted to executive officers and other employees are subject to accelerated expensing if the option holder meets the retirement definition set forth in the 2010 plan. In that case, the fair value of the options is expensed in the fiscal year of grant because generally, if the option holder is employed as of the end of the fiscal year in which the options are granted, such options will not be forfeited but continue to vest according to their schedule following retirement. Similarly, if a non-employee director has served on the company's Board for ten full fiscal years or more, the awards vest immediately upon retirement, and therefore, the fair value of the options granted is fully expensed on the date of the grant.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the assumptions noted in the table below. The expected life is a significant assumption as it determines the period for which the risk-free interest rate, expected stock price volatility, and expected dividend yield must be applied. The expected life is the average length of time in which executive officers, other employees, and non-employee members of the company's Board are expected to exercise their stock options, which is primarily based on historical exercise experience. The company groups executive officers and non-employee directors for valuation purposes based on similar historical exercise behavior. Expected stock price volatility is based on the daily movement of the company's common stock over the most recent historical period equivalent to the expected life of the option. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury rate over the expected life at the time of grant. The expected dividend yield is estimated over the expected life based on the company's historical cash dividends paid, expected future cash dividends and dividend yield, and estimated changes in the company's stock price.

The table below illustrates the weighted-average valuation assumptions for options granted in the following fiscal periods:


Fiscal Years Ended October 31	2020			2019			2018
Expected life of option in years	6.31			6.31			6.04
Expected stock price volatility	19.53		%	19.83		%	20.58		%
Risk-free interest rate	1.73		%	2.77		%	2.21		%
Expected dividend yield	0.99		%	1.18		%	0.97		%
Per share weighted-average fair value at date of grant	$	15.23		$	12.83		$	14.25

The table below presents stock option activity for fiscal 2020:


	Stock Option Awards	Weighted-Average Exercise Price		Weighted-Average Contractual Life (years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of October 31, 2019	2,848,120	$	44.34	5.7	$	93,392
Granted	536,890	76.07
Exercised	(734,398)	31.10
Forfeited	(4,009)	75.23

Outstanding as of October 31, 2020	2,646,603	$	54.40	6.2	$	73,305
Exercisable as of October 31, 2020	1,609,770	$	45.22	4.8	$	59,364

As of October 31, 2020, there was $2.8 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 1.75 years.

The table below presents the total market value of stock options exercised and the total intrinsic value of options exercised during the following fiscal years (in thousands):


Fiscal Years Ended October 31	2020		2019		2018
Market value of stock options exercised	$	56,761	$	92,352	$	70,775
Intrinsic value of stock options exercised1	$	33,920	$	62,288	$	53,778

1 Intrinsic value is calculated as the amount by which the stock price at exercise date exceeded the option exercise price.

Performance Share Awards

Under the 2010 plan, the company grants performance share awards to executive officers and other employees under which they are entitled to receive shares of the company's common stock contingent on the achievement of performance goals of the company, which are generally measured over a three-year period. The number of shares of common stock a participant receives can be increased (up to 200.0 percent of target levels) or reduced (down to zero) based on the level of achievement of performance goals and will vest at the end of a three-year period. Performance share awards are generally granted on an annual basis in the first quarter of the company's fiscal year. Compensation cost is recognized for these awards on a straight-line basis over the vesting period based on the per share fair value, which is equal to the closing price of the company's common stock on the date of grant, and the probability of achieving each performance goal.

Factors related to the company's performance share awards are as follows (in thousands, except per award data):


Fiscal Years Ended October 31	2020		2019		2018
Weighted-average fair value per award at date of grant	$	77.33	$	59.58	$	65.40
Fair value of performance share awards vested	$	6,271	$	6,300	$	8,419

The table below presents fiscal 2020 activity for unvested performance share awards:


	Performance Shares	Weighted-Average Fair Value at Date of Grant
Unvested as of October 31, 2019	192,854	$	59.47
Granted	81,655	77.33
Vested	(82,782)	54.52
Forfeited	(4,306)	61.27
Unvested as of October 31, 2020	187,421	$	67.58

As of October 31, 2020, there was $3.4 million of total unrecognized compensation cost related to unvested performance share awards. That cost is expected to be recognized over a weighted-average period of 1.75 years.

Restricted Stock Unit Awards

Under the 2010 plan, restricted stock unit awards are generally granted to certain employees that are not executive officers. Occasionally, restricted stock unit awards may be granted, including to executive officers, in connection with hiring, mid-year promotions, leadership transition, or retention. Restricted stock unit awards generally vest one-third each year over a three-year period, or vest in full on the three-year anniversary of the date of grant. Such awards may have performance-based rather than time-based vesting requirements. Compensation cost equal to the grant date fair value, net of estimated forfeitures, is recognized for these awards over the vesting period. The grant date fair value is equal to the closing price of the company's common stock on the date of grant multiplied by the number of shares subject to the restricted stock unit awards and estimated forfeitures are determined on the grant date based on historical forfeiture experience.

Factors related to the company's restricted stock unit awards are as follows (in thousands, except per award data):


Fiscal Years Ended October 31	2020		2019		2018
Weighted-average fair value per award at date of grant	$	74.55	$	66.26	$	63.24
Fair value of restricted stock units vested	$	3,410	$	3,083	$	4,888

The table below presents fiscal 2020 activity for unvested restricted stock units:


	Restricted Stock Units	Weighted-Average Fair Value at Date of Grant
Unvested as of October 31, 2019	124,467	$	65.30
Granted	27,161	74.55
Vested	(48,212)	64.97
Forfeited	(3,136)	70.40
Unvested as of October 31, 2020	100,280	$	67.69

As of October 31, 2020, there was $3.0 million of total unrecognized compensation cost related to unvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 1.76 years.

Deferred Compensation Plan

The company maintains a deferred compensation plan that allows executive officers and other employees that receive performance share awards under the 2010 plan to defer receipt of shares of the company's common stock paid out under such awards to a date in the future. Participants can defer up to 100.0 percent of the common stock payout and are always 100.0 percent vested in their accounts. Common stock payout deferrals under this plan are held in a rabbi trust and treated in a manner similar to treasury shares and are recorded at cost within stockholders' equity in the Consolidated Balance Sheets as of October 31, 2020 and 2019. The total of common stock required to settle this deferred compensation obligation is included in the denominator in both basic and diluted earnings per share calculations.