12.

Share-Based Compensation

Our 2007 Stock Incentive Plan (“Plan”) authorizes the grant of up to 10.0 million shares plus canceled and forfeited awards. The Plan allows for the issuance of non-qualified stock options, incentive stock options, performance shares, restricted stock units, and other stock-based awards to officers, employees, and directors. As of October 26, 2012, 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.

The total share-based compensation expense we recognized for 2012, 2011, and 2010 was $27.4 million, $25.5 million, and $25.0 million, respectively. The total stock-based compensation expense is reflected in our Consolidated Statement of Cash Flows in Operating Activities under the heading Other, net. The corresponding deferred tax asset recognized related to the stock-based compensation expense was approximately $8.0 million, $7.8 million, and $7.5 million in 2012, 2011, and 2010, respectively.

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 beginning on the one-year anniversary date over three years and expire ten years from the grant date. A summary of stock option activity under all plans are as follows:


Dollars in millions, except share data	Number of Options			Weighted- Average Exercise Price Per Share		Weighted- Average Remaining Contractual Term		Weighted- Average Grant - Date Fair Value		Aggregate Intrinsic Value

Outstanding at October 30, 2009		3,634,045		$	29.95		7.8			$	79.3

Options granted		510,500			52.83			$	17.46
Options exercised		(1,047,868	)		27.05						33.3
Options forfeited or cancelled		(249,991	)		30.22


Outstanding at October 29, 2010		2,846,686		$	35.09		7.4				102.1


Options granted		509,500			80.64				24.20
Options exercised		(1,431,349	)		36.84						73.6
Options forfeited or cancelled		(90,489	)		41.55


Outstanding at October 28, 2011		1,834,348		$	46.05		7.4				82.8


Options granted		459,500			87.31				27.93
Options exercised		(342,047	)		28.16						18.9
Options forfeited or cancelled		(57,956	)		69.66


Outstanding at October 26, 2012		1,893,845		$	58.28		7.1				26.3

Exercisable at October 26, 2012		1,009,916		$	39.69		5.8				24.9

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:


	2012			2011			2010

Risk free interest rate		0.40	%		0.77	%		1.23	%
Expected volatility		44.92	%		41.07	%		49.14	%
Expected life in years		3.7			3.8			3.4
Dividend yield		0.90	%		0.90	%		1.37	%

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 behavior and the projected exercise of unexercised stock options. The expected dividend yield is based on the expected annual dividends divided by the grant date market value of our common stock.

At October 26, 2012, there was $12.1 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 1.8 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.

Restricted stock units granted to employees vest over a five-year period with one-third vesting on the third, fourth, and fifth anniversaries of the grant date. Restricted stock units provide a number of shares of common stock equal to the number of vested units and will be delivered to the individual as the units vest.

Restricted stock units granted to directors vest one year from the grant date and generally provide a number of shares of common stock equivalent to the restricted stock units and will be delivered to the individual director one year after their service on the Board of Directors terminates.

Dividends accrue on all restricted stock units and 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 under all plans is as follows:


Dollars in millions, except share data	Number of Units			Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value

Outstanding at October 30, 2009		534,684		$	26.57

Units granted		224,740			53.03
Units earned from dividends		8,470			57.16
Units settled		(35,582	)		28.30	$	2.1
Units deferred		(13,190	)		34.88		0.8
Units forfeited		(37,621	)		33.72


Outstanding at October 29, 2010		681,501			35.03

Units granted		295,606			81.95
Units earned from dividends		7,137			85.63
Units settled		(34,450	)		48.63		2.8
Units deferred		(16,031	)		52.85		1.3
Units forfeited		(65,789	)		64.62


Outstanding at October 28, 2011		867,974			48.32

Units granted		325,588			79.08
Units earned from dividends		10,520			66.04
Units settled		(112,744	)		33.42		9.1
Units deferred		(25,252	)		34.87		2.2
Units forfeited		(50,139	)		52.12


Outstanding at October 26, 2012		1,015,947		$	60.16

At October 26, 2012 there was $34.8 million of unrecognized compensation expense related to restricted stock units that is expected to be recognized over a weighted-average period of 3.5 years. At October 26, 2012 the balance of deferred restricted stock units is 67,656 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 2012, 2011, and 2010 performance share award programs, the performance measure for executive officers is average return on equity. For our 2012, 2011, and 2010 performance share award program, the performance measure for all other participants is average diluted earnings per share for a three year cycle from fiscal 2012 through fiscal 2014, fiscal 2011 through fiscal 2013, and fiscal 2010 through fiscal 2012, 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, 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 target award. The final awards for the fiscal 2010 performance share program amounted to 122,004 shares and the intent and historical practice is to pay out the award entirely in company stock on December 19, 2012..

A summary of performance share activity under all plans is as follows:


Dollars in millions, except share data	Number of Shares			Weighted- Average Grant Date Fair Value		Aggregate Intrinsic Value

Outstanding at October 30, 2009		520,950		$	34.64

Shares granted		91,500			52.83
Target adjustment		263,258			34.27	$	3.8
Shares distributed		(63,666	)		41.25
Shares forfeited		(49,431	)		27.95

Outstanding at October 29, 2010		762,611			36.57

Shares granted		75,000			80.69
Target adjustment		21,266			87.50
Shares distributed		(158,970	)		56.87		13.7
Shares forfeited		(30,158	)		35.20

Outstanding at October 28, 2011		669,749			38.38

Shares granted		145,100			80.40
Target adjustment		(21,533	)		78.69
Shares distributed		(450,855	)		21.69		36.9
Shares forfeited		(4,246	)		55.17


Outstanding at October 26, 2012		338,215		$	75.87

At October 26, 2012 there was $9.9 million of unrecognized compensation expense related to performance shares that is expected to be recognized over a weighted-average period of 1.9 years. At October 26, 2012 the balance of deferred performance shares is 111,266 shares.