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Note 15 - Share-based Compensation Plans

12 Months Ended

Oct. 31, 2023

Notes to Financial Statements

Share-Based Payment Arrangement [Text Block]

15. Stock-Based Compensation Plans

We have stock incentive plans for certain officers, key employees and directors that are approved by a committee appointed by the Board or its delegate. As of October 31, 2023, we had 0.3 million shares authorized and remaining for future issuance under our stock incentive plans. Based on the terms of our stock incentive plans, awards that are forfeited become available to us for future grants.

Stock Options

Prior to fiscal 2021, stock options were granted. There have been no stock option grants during fiscal years 2023, 2022 or 2021. The exercise price of all stock options is at least equal to the fair market value of an underlying share of our Class A common stock on the date of the grant. The fair value of each stock option is estimated using the Black-Scholes option-pricing model. Stock options granted to officers and associates generally vest in four equal installments on the second, third, fourth and fifth anniversaries of the date of the grant. Non-employee directors’ stock options vest in three equal installments on the first, second and third anniversaries of the date of the grant. All stock options expire on the tenth anniversary from the date of grant.

The following table summarizes stock option activity at October 31, 2023:

										Weighted-
										Average
										Remaining
		*October 31,*				*Weighted-Average*				*Contractual*				*Aggregate*
		*2023*				*Exercise Price*				*Life (Years)*				*Intrinsic Value*
Stock options outstanding at beginning of period			166,559			$	48.02
Granted			-			$	-
Exercised			(4,363	)		$	31.14
Forfeited			(250	)		$	7.85
Expired			(18,399	)		$	157.00
Stock options outstanding at end of period			143,547			$	34.63				4.4			$	5,231,933
Stock options exercisable at end of period			132,903			$	36.66				4.3			$	4,590,643

The total intrinsic value of stock options exercised during both fiscal 2023 and 2022 was $0.2 million, and in fiscal 2021 was $4.8 million. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price.

Based on the fair value at the time of grant, the per share weighted-average fair value of stock options vested in fiscal 2023, 2022 and 2021 was $6.29, $16.46 and $8.82, respectively.

RSUs and Performance Units

RSUs are measured based upon the fair value of a share of our Class A common stock on the date of grant. Shares underlying RSUs granted to officers and associates generally vest in four equal installments on the first, second, third, and fourth anniversaries of the grant date. During fiscal year 2023, each of our six existing non-employee directors were granted RSUs subject to a two-year post-vesting holding period. Generally, participants aged 60 years or older, or aged 58 with 15 years of service, are eligible to vest in their awards on an accelerated basis upon their retirement.

Grants of market share units ("MSUs"), performance share units ("PSUs") and the stock portion of the long-term incentive plans ("LTIPs") (each discussed below), are also awarded as compensation.

The following table summarizes nonvested time-based RSU and MSU share activity as of October 31, 2023:

		*October 31,*				*Weighted-Average Grant Date*
		*2023*				*Fair Value*
Nonvested time-based at beginning of period			175,637			$	33.43
Granted			63,275			$	87.92
Vested (1)			(97,183	)		$	29.89
Forfeited			(9,586	)		$	43.90
Nonvested time-based at end of period			132,143			$	52.79

The following table summarizes nonvested performance-based LTIP, PSU and MSU share activity as of October 31, 2023:

		*October 31,*				*Weighted-Average Grant Date*
		*2023*				*Fair Value*
Nonvested performance-based at beginning of period			507,157			$	41.14
Granted			272,567			$	56.09
Vested (1)			(184,911	)		$	42.79
Forfeited			(13,313	)		$	51.39
Nonvested performance-based at end of period			581,500			$	73.90

(1) Includes 27,686 time-based vested share awards and 149,693 performance-based vested share awards which were deferred and not yet issued at October 31, 2023.

LTIP awards include share adjustments for the difference between target performance metrics at the time of grant and the final performance outcome. Share adjustments are reflected in the “Granted” line above at the time the performance is finalized. For LTIP awards granted prior to fiscal 2023, shares vest on the third, fourth and fifth anniversary of the grant date, subject to performance achievement. The 2023 LTIP is subject to cliff vesting at the end of the performance period.

The fair value of LTIP and PSUs (discussed below) is determined using the Finnerty model, which uses an arithmetic average strike, put option. The strike price is based on the predetermined period average value of the underlying asset. The following assumptions were used for the 2023 LTIP grants: historical volatility factor of 75.29% based on the expected market price of our Class A common stock for the two-year period ending on the valuation date, concluded stock price assumption of 4.19% equal to the continuously compounded two-year yield and a dividend yield of zero. The following assumptions were used for the 2022 LTIP grants: historical volatility factor of 104.16% based on the expected market price of our Class A common stock for the two-year period ending on the valuation date, concluded stock price assumption of 0.67% equal to the continuously compounded two-year yield and a dividend yield of zero. The following assumptions were used for the 2021 LTIP grants: historical volatility factor of 112.92% based on the expected market price of our Class A common stock for the two-year period ending on the valuation date, concluded stock price assumption of 0.16% equal to the continuously compounded two-year yield and a dividend yield of zero.

PSUs granted in fiscal 2020 vest in four equal installments commencing on the second, third, fourth and fifth anniversary of the grant date, except that no portion of the award will vest unless the Board determines that the Company achieved specified earnings goals. Fiscal 2023, 2022 and 2021 PSUs are subject to cliff vesting on the third year after the grant date. The following assumptions were used for the 2023 PSU grants: historical volatility factor of 66.66% based on the expected market price of our Class A common stock for the two-year period ending on the valuation date, concluded stock price assumption of 4.54% equal to the continuously compounded two-year yield and a dividend yield of zero. The following assumptions were used for the 2022 PSU grants: historical volatility factor of 78.82% based on the expected market price of our Class A common stock for the two-year period ending on the valuation date, concluded stock price assumption of 3.04% equal to the continuously compounded two-year yield and a dividend yield of zero. The following assumptions were used for 2021 PSU grants: historical volatility factor of the expected market price of our common stock of 112.44% for the two-year period ending on the valuation date, and the concluded risk-free rate assumption of 0.16% equals the continuously compounded two-year yield, and dividend yield of zero.

There were no MSUs granted in fiscal 2023, 2022 and 2021. The fair value of MSUs is determined using the Monte-Carlo simulation model. The first 50% of an MSU grant vests in four equal annual installments, commencing on the second anniversary from the date of grant, subject to stock price performance conditions, pursuant to which the actual number of shares issuable with respect to vested MSUs may range from 0% to 200% of the target number of shares under each MSU award, generally depending on the growth in the 60-day average trading price of the Company’s shares during the period between the grant date and the relevant vesting dates. The remaining 50% of an MSU grant is subject to financial performance conditions in addition to the stock price performance conditions. These remaining MSUs vest in four equal installments with the first installment vesting on the third January 1st after the grant date, and the remaining annual installments commencing on the third anniversary from the date of grant, except that no portion of the award will vest unless the Board determines the Company achieved certain specified performance goals.

The total grant date fair value of RSU and performance unit awards granted during fiscal 2023, 2022 and 2021 was $10.4 million, $9.6 million and $9.2 million, respectively. The total fair value of these awards vested during fiscal 2023, 2022 and 2021 was $25.2 million, $15.6 million and $13.7 million, respectively.

During the year-ended October 31, 2023 we issued 51,296 RSUs, 43,268 MSUs and 32,671 LTIP shares. As of October 31, 2023, there was $16.2 million of unrecognized stock-based compensation, which is primarily comprised of unrecognized expenses for RSUs, MSUs, PSUs, and the stock portion of LTIPs. The cost is expected to be recognized over a weighted-average period of 1.6 years.

Stock-Based Compensation Expense

For the years ended October 31, 2023, 2022 and 2021, stock-based compensation expense was $14.2 million ($11.4 million post tax), $10.3 million ($7.3 million post tax) and $7.7 million ($5.2 million post tax), respectively. Stock-based compensation for RSUs, MSUs, PSUs, and the stock portion of LTIPs was $14.2 million, $10.2 million and $7.4 million for fiscal 2023, 2022 and 2021, respectively. In addition, stock option compensation expense was $27 thousand, $0.1 million and $0.2 million for the years ended October 31, 2023, 2022 and 2021, respectively.