Share-Based Compensation

Our 2016 Omnibus Incentive Compensation Plan (the “2016 Plan”) authorizes the grant of up to 6.3 million shares plus canceled and forfeited awards. The 2016 Plan replaced the 2007 Stock Incentive Plan during the current fiscal year. The 2016 Plan allows for the issuance of non-qualified stock options, incentive stock options, stock appreciation rights, performance shares, restricted stock units and other stock-based awards to officers, employees and directors. For every share representing a stock option grant or a stock appreciation right, 1 share is removed from the 2016 Plan. However, for every share representing a performance share grant, a restricted stock unit grant or any other stock-based award grant, 2.4 shares are removed from the 2016 Plan. As of October 28, 2016, none of the options granted qualify as incentive stock options under the Internal Revenue Code. We have historically issued new common stock in order to satisfy share-based payment awards and plan to do so to satisfy future awards.

Total share-based compensation expense recognized for fiscal 2016, 2015 and 2014 was $25.6 million, $30.6 million and $17.7 million, respectively. The total share-based compensation expense is reflected in our Consolidated Statement of Cash Flows in operating activities as an add back to net income (loss). The corresponding deferred tax asset recognized related to the share-based compensation expense was $6.9 million, $7.8 million and $4.4 million for fiscal 2016, 2015 and 2014, respectively.

Upon a change in control, stock options whose grant price is greater than the change in control price and all other stock-based compensation awards will vest and become non-forfeitable.

Stock Options

We have granted non-qualified stock options to purchase our common stock at prices equal to the fair market value of the stock on the grant dates. Stock options vest ratably over three years beginning on the one-year anniversary date, and they expire ten years from the grant date. A summary of stock option activity follows:



Dollars in millions, except per share data	Number of Options		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Term	Weighted-Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Outstanding as of October 25, 2013	2,245,075		$	59.28	6.8			$	18.7
Options granted	847,150		55.45			$	12.88
Options exercised	(241,739	)	37.05					5.5
Options forfeited or cancelled	(200,036	)	70.29
Outstanding as of October 31, 2014	2,650,450		$	59.34	6.7			9.6
Options granted	499,000		50.25			11.59
Options exercised	(26,971	)	20.59					0.7
Options forfeited or cancelled	(285,130	)	60.07
Outstanding as of October 30, 2015	2,837,349		$	58.04	5.9			—
Options granted	1,375,800		12.19			4.36
Options exercised	(29,422	)	21.69					0.1
Options forfeited or cancelled	(327,626	)	56.75
Outstanding as of October 28, 2016	3,856,101		$	42.17	6.4			22.3
Exercisable as of October 28, 2016	2,060,053		$	59.19	4.4			1.4

The fair value of the option awards is the estimated fair value at grant date using the Black Scholes valuation model and is recognized as expense on a straight line basis. The weighted-average assumptions are as follows:



	2016		2015		2014
Risk free interest rate	1.30	%	1.08	%	0.64	%
Expected volatility	49.72	%	35.15	%	35.76	%
Expected life in years	3.4		3.3		3.2
Dividend yield	0.33	%	1.60	%	1.30	%

The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant for the respective expected life of the option. The expected volatility is based on a weighted average of historical and implied volatility of our common stock. The expected life is based on historical exercise and cancellation behavior and the projected exercises and cancellations of outstanding stock options. The expected dividend yield is based on the expected annual dividends divided by the grant date market value of our common stock.

As of October 28, 2016, there was $5.7 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 1.7 years.

Restricted Stock Units

We grant restricted stock units to certain employees and to all non-employee members of our Board of Directors. The fair value of our restricted stock units is determined based on the closing price of our stock on the date of grant and is recognized as expense on a straight line basis over the vesting term.

Restricted stock units granted to employees vest over three years with one-third vesting on the first, second and third anniversaries of the grant date. These restricted stock units provide a number of shares of common stock equal to the number of vested units. These shares are delivered to the employee as the restricted stock units vest.

Restricted stock units granted to non-employee members of our Board of Directors vest one year from the grant date. These restricted stock units provide a number of shares of common stock equal to the number of vested units. The date the common stock is delivered to an individual director depends on the number of restricted stock units that the director has accumulated from prior grants. If a director has not yet accumulated 10,000 restricted stock units, the common stock will be delivered to the director one year after their service on the Board of Directors terminates. If a director has accumulated 10,000 restricted stock units, the common stock is either delivered on the vest date or will be deferred at the discretion of the director. Specific deferral elections are required to be completed prior to each grant.

Dividend equivalents accrue on all restricted stock units and the dividend equivalents vest consistent with the underlying award. In the event of a change in control, the units will be paid out in cash based on the market price of the common stock as of the change in control date.

A summary of restricted stock unit activity follows:



Dollars in millions, except per share data	Number of Units		Weighted-Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Outstanding as of October 25, 2013	1,066,916		$	60.35
Units granted	379,759		55.49
Units earned from dividends	15,813		57.51
Units settled	(172,760	)	55.63		$	9.7
Units deferred	(2,601	)	21.69		0.1
Units forfeited	(106,808	)	64.64
Outstanding as of October 31, 2014	1,180,319		59.14
Units granted	600,116		49.83
Units earned from dividends	36,019		31.31
Units settled	(311,966	)	66.22		15.2
Units forfeited	(174,899	)	52.13
Outstanding as of October 30, 2015	1,329,589		53.45
Units granted	904,332		12.39
Units earned from dividends	4,048		14.97
Units settled	(476,137	)	59.63		6.7
Units forfeited	(157,486	)	38.01
Outstanding as of October 28, 2016	1,604,346		$	28.89

As of October 28, 2016, there was $15.6 million of unrecognized compensation expense related to restricted stock units that is expected to be recognized over a weighted-average period of 1.4 years. As of October 28, 2016, the balance of deferred restricted stock units is 14,854 shares.

Performance Shares

The performance share award programs under our stock incentive plans provide long-term incentive compensation opportunities to certain senior executives and other managers. The fair value of our performance shares is determined based on the closing price of our stock on the date of grant, reduced by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, and is recognized as expense on a straight line basis.

Shares of common stock may be earned by the participants under the performance share award programs if at the end of a three-year award cycle our financial performance over the course of the cycle exceeds certain threshold amounts. For our 2016, 2015 and 2014 performance share award programs, the performance measure for executive officers is average return on equity, and the performance measure for all other participants is average diluted earnings per share for the three year cycle from fiscal 2016 through fiscal 2018, fiscal 2015 through fiscal 2017, and fiscal 2014 through fiscal 2016, respectively. Each performance share represents the right to earn one share of common stock.

Awards can range from 0% to 150% (or, in certain cases for the 2015 and 2014 performance share aware programs, 180%) of the target award opportunities, and may be paid out in company stock, cash or a combination of stock and cash as determined by the Human Resources and Nominating Committee of the Board of Directors. In the event of a change in control, the performance shares are paid out in cash based on the greater of actual performance or the target award. The final awards for the fiscal 2014 performance share program amounted to 39,770 shares and the intent is to pay out the award entirely in company stock on December 19, 2016.

A summary of performance share activity follows:



Dollars in millions, except per share data	Number of Shares		Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding as of October 25, 2013	344,389		$	72.72
Shares granted	109,700		53.42
Target adjustment	(245,013	)	63.76
Shares distributed	(56,804	)	78.69		$	3.0
Shares forfeited	(52,243	)	57.71
Outstanding as of October 31, 2014	100,029		53.42
Shares granted	167,625		47.96
Target adjustment	(24,253	)	50.06
Shares forfeited	(25,127	)	49.45
Outstanding as of October 30, 2015	218,274		50.06
Shares granted	261,400		12.08
Target adjustment	(128,934	)	49.98
Shares forfeited	(11,315	)	30.00
Outstanding as of October 28, 2016	339,425		$	21.51

As of October 28, 2016, there was $3.4 million of unrecognized compensation expense related to performance shares that is expected to be recognized over a weighted-average period of 1.7 years