Stock-Based Compensation

12 Months Ended

Nov. 30, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

STOCK-BASED COMPENSATION

We have four types of stock-based compensation awards: restricted stock units (RSUs), stock options, company stock awarded as part of our long-term performance plan (LTPP), and beginning in 2020, price-vested stock options. Total stock-based compensation expense for 2020, 2019 and 2018 was $46.0 million, $37.2 million and $25.6 million, respectively. Total unrecognized stock-based compensation expense related to our RSUs and stock options at November 30, 2020 was $23.2 million and the weighted-average period over which this will be recognized is 1.3 years. Total unrecognized stock-based compensation expense related to our price-vested stock options at November 30, 2020 was $23.3 million and the weighted-average period over which this will be recognized is 3.0 years. Total unrecognized stock-based compensation expense related to our LTPP is variable in nature and is dependent on the company's execution against established performance metrics under performance cycles related to this plan. As of November 30, 2020, we have 6.6 million shares remaining available for future issuance under our RSUs, stock option and LTPP award programs.

For all awards, forfeiture rates are considered in the calculation of compensation expense.

The following summarizes the key terms and the methods of valuation and expense recognition for each of our stock-based compensation awards.

RSUs

RSUs are valued at the market price of the underlying stock, discounted by foregone dividends, on the date of grant. Substantially all of the RSUs granted vest over a three-year term or, if earlier, upon the retirement eligibility

date of the holder.

A summary of our RSU activity for the years ended November 30 follows:


(shares in thousands)	2020			2019			2018
	Shares	Weighted- average price		Shares	Weighted- average price		Shares	Weighted- average price
Beginning of year	762	$	57.95	846	$	51.53	534	$	43.24
Granted	296	67.03		258	71.62		556	56.36
Vested	(325)	57.56		(318)	52.08		(226)	44.08
Forfeited	(19)	62.96		(24)	56.78		(18)	48.27
Outstanding—end of year	714	$	61.74	762	$	57.95	846	$	51.53

Stock Options (Other than Price-Vested Stock Options)

Stock options are granted with an exercise price equal to the market price of the stock on the date of grant. Substantially all of the options, with the exception of price-vested options detailed below, vest ratably over a three-year period or, if earlier, upon the retirement-eligibility dates of the holders and are exercisable over a 10-year period. Upon exercise of the option, shares are issued from our authorized and unissued shares.

The fair value of the options is estimated with a lattice option pricing model which uses the assumptions in the following table. We believe the lattice model provides an appropriate estimate of fair value of our options as it allows for a range of possible outcomes over an option term and can be adjusted for changes in certain assumptions over time. Expected volatilities are based primarily on the historical performance of our stock. We also use historical data to estimate the timing and amount of option exercises and forfeitures within the valuation model. The expected term of the options is an output of the option pricing model and estimates the period of time that options are expected to remain unexercised. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense is calculated based on the fair value of the options on the date of grant.

The per share weighted-average fair value for all options granted was $13.27, $13.76 and $10.15 in 2020, 2019 and 2018, respectively. These fair values were computed using the following range of assumptions for the years ended November 30:


	2020		2019		2018
Risk-free interest rates	0.0 - 0.6%		2.2 - 2.5%		1.7 - 2.9%
Dividend yield	1.8	%	1.5	%	2.0	%
Expected volatility	22.8	%	17.4%		18.4%
Expected lives	7.9 years		7.5 years		7.6 years

Under our stock option plans, we may issue shares on a net basis at the request of the option holder. This occurs by netting the option cost in shares from the shares exercised.

A summary of our stock option activity for the years ended November 30 follows:


(shares in millions)	2020			2019			2018
	Shares	Weighted- average exercise price		Shares	Weighted- average exercise price		Shares	Weighted- average exercise price
Beginning of year	5.2	$	48.09	7.2	$	41.30	9.6	$	35.96
Granted	0.7	69.31		0.6	73.70		0.8	52.98
Exercised	(1.4)	41.01		(2.6)	35.54		(3.2)	27.64

Outstanding—end of year	4.5	53.56		5.2	48.09		7.2	41.30
Exercisable—end of year	3.2	$	47.76	3.8	$	43.31	5.6	$	38.27

As of November 30, 2020, the intrinsic value (the difference between the exercise price and the market price) for all options currently outstanding was $178.7 million and for options currently exercisable was $146.0 million. At November 30, 2020, the differences between options outstanding and options expected to vest and their related weighted-average exercise prices, aggregate intrinsic values and weighted-average remaining lives were not material. The total intrinsic value of all options exercised during the years ended November 30, 2020, 2019 and 2018 was $68.4 million, $111.0 million and $108.0 million, respectively. A summary of our stock options outstanding and exercisable at November 30, 2020 follows:


(shares in millions)	Options outstanding				Options exercisable
Range of exercise price	Shares	Weighted- average remaining life (yrs.)	Weighted- average exercise price		Shares	Weighted- average remaining life (yrs.)	Weighted- average exercise price
$23.00 - $37.50	0.5	2.8	$	33.99	0.5	2.8	$	33.99
$37.51 - $56.00	2.7	5.9	48.36		2.5	5.8	47.97
$56.01 - $74.50	1.3	8.9	71.27		0.2	8.3	73.64
	4.5	6.5	$	53.56	3.2	5.6	$	47.76

Price-Vested Stock Options

In November 2020, we granted approximately 2,482,000 price-vested stock options to certain employees. The price-vested stock options were granted with an exercise price of $93.49 which was equal to the market price of our stock on the date of grant. The price-vested options are not exercisable until a three year service condition is achieved, and will become exercisable after that time period only if the average closing price of our stock price equals or exceeds thresholds of 60%, 80% or 100% appreciation from the exercise price for 30 consecutive trading days within a five-year period from the date of grant. If the options become exercisable, they are exercisable up to 10 years from the date of grant. The options granted were divided equally between the three appreciation thresholds. Employees who are retirement eligible vest on a pro-rata basis over a three-year period if the market condition is met in the five-year period from the date of grant. If the market conditions are not met in the five-year period from the date of grant, the options do not become exercisable and will be forfeited.

The fair value of the price-vested options was estimated using a lattice model. The per share weighted-average fair value for the price-vested stock options granted was $11.88, $9.26, and $7.05, for the 60%, 80% and 100% appreciation thresholds, respectively. These fair values were computed using the following range of assumptions:



Risk-free interest rates	0.85	%
Dividend yield	1.5	%
Expected volatility	21.2	%
Expected lives	5.6 - 6.2 years

LTPP

Our LTPP grants in 2018 will deliver awards in a combination of cash and company stock. The stock compensation portion of the LTPP grants in 2018 awards shares of company stock if certain company performance objectives are met at the end of a three-year period. LTPP awards granted in 2020 and 2019 will be delivered entirely in company stock, with the target award calculated using a combination of a market-based total shareholder return and performance-based components. These awards are valued based on the fair value of the underlying stock on the date of grant.

A summary of the LTPP award activity for the years ended November 30 follows:


(shares in thousands)	2020			2019			2018
	Shares	Weighted- average price		Shares	Weighted- average price		Shares	Weighted- average price
Beginning of year	392	$	57.98	436	$	41.78	440	$	42.16
Granted	130	86.14		136	75.26		172	50.95
Vested	(88)	44.98		(114)	43.20		(120)	37.01
Performance adjustment	(44)	50.95		(66)	44.98		(52)	43.20
Forfeited	(8)	65.68		—	—		(4)	48.71
Outstanding—end of year	382	$	71.20	392	$	57.98	436	$	41.78