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SHARE-BASED COMPENSATION

12 Months Ended

Oct. 27, 2024

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

22. SHARE-BASED COMPENSATION

We issue stock options and restricted stock units (RSU) to key employees. RSUs are also issued to nonemployee directors for their services as directors. RSUs consist of service-based, performance/service-based, and market/service-based awards.

The Long-Term Incentive Cash granted to certain employees is accounted for as share-based compensation. This incentive includes a performance metric based, in part, on the price of our shares. We are authorized to grant shares for equity incentive awards. The outstanding shares authorized were 15.0 million at October 27, 2024. We currently use shares that have been repurchased through our stock repurchase programs to satisfy share option exercises and RSU conversions. The stock awards vesting periods and the dividend equivalents earned during the vesting period follow:

​

​	​	​	​	​	​
​	​	Vesting	​	Dividend	​
​	​	Period	​	Equivalents	​
Stock options	​	1-3 years	​	Not included	​
Service-based RSUs	​	1-3 years	​	Included	​
Performance/service-based RSUs	​	3 years	​	Not included	​
Market/service-based RSUs	​	3 years	​	Not included	​

​

Stock options expire ten years from the grant date. Performance/service-based awards are subject to a performance metric based on our compound annual revenue growth rate, compared to a benchmark group of companies. Market/service-based awards are subject to a market related metric based on total shareholder return, compared to a benchmark group of companies. The performance/service-based units and market/service-based units award common stock in a range of zero to 200 percent for each unit granted based on the level of the metric achieved.

The fair value of stock options and restricted stock units is determined using our closing price on the grant date. The fair value of the market/service-based RSUs is determined using a Monte Carlo model. These awards are expensed over the shorter of the award vesting period or the employee’s retirement eligibility period. The performance/service-based units’ expense is adjusted quarterly for the probable number of shares to be awarded. We

recognize the effect of award forfeitures as an adjustment to compensation expense in the period the forfeiture occurs.

The total share-based compensation expense, recognized income tax benefits, and total grant-date fair values of stock options and restricted stock units vested consisted of the following:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	2024		​	2023		​	2022		​
Share-based compensation expense	​	$	208	​	$	130	​	$	85	​
Income tax benefits	​	​	34	​	​	21	​	​	17	​
Stock options and restricted stock units vested	​	​	110	​	​	84	​	​	74	​

​

At October 27, 2024, there was $110 of total unrecognized compensation cost from share-based compensation arrangements. This compensation is expected to be recognized over a weighted-average period of approximately 1.5 years.

Stock Options

The fair value of each stock option award was estimated on the date of grant using a binomial lattice option valuation model. The assumptions used for the binomial lattice model to determine the fair value of options follow:

​

​	​	​	​	​	​	​	​
​		2024		2023		2022
Risk-free interest rate*		3.96%		2.68%		1.27%	​
Expected dividends	​	1.6%	​	1.1%	​	1.2%	​
Volatility*	​	27.0%	​	33.0%	​	32.0%	​
Expected term (in years)*		5.1		5.1		5.1	​

*    Weighted-averages

​

The risk-free rates are based on U.S. Treasury security yields at the time of grant. Expected volatilities are based on implied volatilities from traded call options on our stock. We use historical data to estimate option exercise behavior representing the weighted-average period that options granted are expected to be outstanding.

The activity for outstanding stock options at October 27, 2024, and changes during 2024 follow:

​

​	​	​	​	​	​	​	​	​	​	​	​
​	​		​	​	​	​	Remaining	​	Aggregate
​	​	​	​	Exercise		​	Contractual	​	Intrinsic
​	​	Shares	​	Price*		​	Term	​	Value
​	​	(millions)		(per share)			(years)		(millions)
Outstanding at beginning of year		1.7	​	$	190.08	​	​	​	​	​	​
Granted		.2	​		377.01	​	​	​	​	​	​
Exercised		(.4)	​		102.85	​	​	​	​	​	​
Outstanding at end of year		1.5	​		242.41		5.04		$	249.1	​
Exercisable at end of year		1.1	​		197.53		3.96	​		239.6	​

*    Weighted-averages

​

​

The amounts related to stock options were as follows in millions of dollars unless otherwise noted:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	2024		​	2023		​	2022		​
Weighted-average grant date fair value (per share)	​	$	98.04	​	$	136.46	​	$	89.20	​
Intrinsic value of options exercised	​	​	125	​	​	153	​	​	169	​
Cash received from exercises	​	​	44	​	​	60	​	​	63	​
Tax benefit from exercises	​	​	27	​	​	34	​	​	39	​

​

​

Restricted Stock Units

The weighted-average grant date fair values were as follows:

​

​	​	​	​	​	​	​	​	​	​	​
​	​	2024		​	2023		​	2022		​
Service-based	​	$	377.72	​	$	428.35	​	$	347.59	​
Performance/service-based	​	​	360.53	​	​	424.93	​	​	331.47	​
Market/service-based	​	​	370.87	​	​	​	​	​	​	​

​

Our RSUs at October 27, 2024 and changes during 2024 in thousands of shares and dollars per share follow:

​

​	​	​	​	​	​	​
​	​	​	​	Grant-Date
​	​	Shares	​	Fair Value* (per share)
Service-based:	​	​	​	​	​	​
Nonvested at beginning of year		310	​	$	348.82	​
Granted		383	​		377.72	​
Vested		(196)	​		330.73	​
Forfeited	​	(26)	​	​	375.41	​
Nonvested at end of year		471	​		378.39	​
Performance/service-based:	​	​	​	​	​	​
Nonvested at beginning of year		119	​		331.78	​
Granted		52	​		360.53	​
Vested		(88)	​		245.73	​
Performance change		44	​		245.73	​
Forfeited		(1)	​		360.53	​
Nonvested at end of year		126	​		373.35	​
Market/service-based:	​	​	​	​	​	​
Nonvested at beginning of year		​	​		​	​
Granted		52	​		370.87	​
Forfeited		(1)	​		370.87	​
Nonvested at end of year		51	​		370.87	​

*    Weighted-averages

​

X

- Definition

The entire disclosure for share-based payment arrangement.

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