10.	Share-Based Compensation

Stock Compensation Plans

The Company’s employee compensation plans are administered by the Compensation Committee of the Company’s Board of Directors (the “Committee”). The Committee is authorized to determine, at time periods within its discretion and subject to the direction of the Board of Directors, which employees will be granted awards, the number of shares covered by any awards granted, and within applicable limits, the terms and provisions relating to the exercise and vesting of any awards.

The Company has one active compensation plan, the 2010 Omnibus Incentive Compensation Plan (the “2010 Omnibus Plan”), for employees and non-employee directors which authorizes the granting of nonvested stock awards and units, performance-based MSU Grants, stock options and other types of share-based awards.

The 2010 Omnibus Plan allows the Committee to grant awards for an aggregate of 1,500,000 shares of the Company’s common stock. However, this share reserve is increased by shares awarded under this and prior plans which are forfeited, expired, settled for cash and shares withheld by the Company in payment of a tax withholding obligation. Additionally, this share reserve was decreased by shares granted from prior plans after July 30, 2010 until December 1, 2010. At August 3, 2018, the number of shares authorized for future issuance under the Company’s active plan is 1,020,477. At August 3, 2018, the number of outstanding awards under the 2010 Omnibus Plan was 103,539.

Types of Share-Based Awards

Nonvested Stock Awards

Nonvested stock awards consist of the Company’s common stock, generally accrue dividend equivalents and vest over 1–5 years. The fair value of the Company’s nonvested stock awards which accrue dividends is equal to the market price of the Company’s stock at the date of the grant. Dividends are forfeited for any nonvested stock awards that do not vest.

The Company’s nonvested stock awards include its long-term performance plans which were established by the Committee for the purpose of rewarding certain officers with shares of the Company’s common stock if the Company achieved certain performance targets. The stock awards under the long-term performance plans are calculated or estimated based on achievement of financial performance measures.

The following table summarizes the performance periods and vesting periods for the Company’s nonvested stock awards under its long-term performance plans at August 3, 2018:

Long-Term Performance Plan (“LTPP”)	Performance Period		Vesting Period (in Years)
2018 LTPP		2018 – 2019	2 or 3
2017 LTPP		2017 – 2018	2 or 3

The following table summarizes the shares that have been accrued under the 2018 LTPP and 2017 LTPP at August 3, 2018:

2018 LTPP			8,892
2017 LTPP			23,511

A summary of the Company’s nonvested stock activity as of August 3, 2018, and changes during 2018 are presented in the following table:

Nonvested Stock	Shares			Weighted-Average Grant Date Fair Value
Unvested at July 28, 2017		32,017		$	139.04
Granted		51,406			154.28
Vested		(38,889	)		153.66
Forfeited		(2,776	)		145.92
Unvested at August 3, 2018		41,758		$	143.73

The following table summarizes the total fair value of nonvested stock that vested for each of the three years:

		2018				2017				2016
Total fair value of nonvested stock		$	5,976			$	14,700			$	8,418

Nonvested Stock Units

Beginning in 2017, the Company adopted long-term incentive plans that award nonvested stock units based upon relative total shareholder return (“rTSR RSUs”). The number of nonvested stock units that will ultimately be awarded and will vest at the end of the applicable three-year performance period is based on relative total shareholder return, which is defined as increases in the Company’s stock price plus dividends paid during the performance period as compared to the total shareholder return of a group of peer companies determined by the Committee. The number of shares awarded at the end of the performance period for each nonvested stock unit may range from 75% to 125% of the target award. The probability of the actual shares expected to be earned is considered in the grant date valuation; therefore, the expense will not be adjusted to reflect the actual units earned. In addition to a service requirement, the vesting of the nonvested stock units is also subject to the achievement of a specified level of operating income during the performance period. If this performance goal is not met, no nonvested stock units will be awarded and no compensation expense will be recorded.

The fair value of the nonvested stock units is determined using the Monte-Carlo simulation model, which simulates a range of possible future stock prices and estimates the probabilities of the potential payouts. This model uses the average prices for the 60 consecutive calendar days beginning 30 days prior to and ending 30 days after the first business day of the performance period. This model also incorporates the following ranges of assumptions:

·	The expected volatilities are the historical volatilities of the Company’s stock and the members of the peer group over the period commensurate with the three-year performance period.

The risk-free interest rate is based on the U.S. Treasury rate assumption commensurate with the three-year performance period. The risk-free rates for the nonvested stock units granted in 2017 ranged from 1.0% to 1.4%. The risk-free interest rate for the nonvested stock units granted in 2018 was 1.6%.

·	The expected dividend yield is assumed to be zero since the award holders are entitled to any dividends paid over the performance period.

Dividends accrue on the nonvested stock units. Dividends will be forfeited for nonvested stock units that do not vest.

The following table summarizes the shares that have been accrued for rTSR RSUs awards under the 2018 and 2017 long-term incentive plans at August 3, 2018:

	Shares
2018 rTSR RSUs		3,368
2017 rTSR RSUs		5,676

Performance-Based Market Stock Units

The number of MSU Grants (last granted in 2016) that will ultimately be awarded and will vest at the end of the applicable three-year performance period for each annual plan is based on total shareholder return, which is defined as the change in the Company’s stock price plus dividends paid during the performance period. The number of shares awarded at the end of the performance period will vary in direct proportion to a target number of shares set at the beginning of the period, up to a maximum of 150% of target, based on the change in the Company’s cumulative total shareholder return over the performance period. The probability of the actual shares expected to be earned is considered in the grant date valuation; therefore, the expense will not be adjusted to reflect the actual units earned. In addition to a service requirement, the vesting of the MSU Grants is also subject to the achievement of a specified level of operating income during the performance period. If this performance goal is not met, no MSU Grants will be awarded and no compensation expense will be recorded.

The fair value of the MSU Grants was determined using the Monte-Carlo simulation model, which simulated a range of possible future stock prices and estimated the probabilities of the potential payouts. This model used the average prices for the 60 consecutive calendar days beginning 30 days prior to and ending 30 days after the first business day of the performance period. This model also incorporated the following ranges of assumptions:

·	The expected volatility was a blend of implied volatility based on market-traded options on the Company’s stock and historical volatility of our stock over the period commensurate with the three-year performance period. The expected volatility for the 2016 MSU Grants ranged from 23% to 24%.

·	The risk-free interest rate was based on the U.S. Treasury rate assumption commensurate with the three-year performance period. The risk-free rates for the 2016 MSU Grants ranged from 0.9% to 1.0%.

·	The expected dividend yield was assumed to be zero since the award holders are entitled to any dividends paid over the performance period.

Dividends accrue on the 2016 MSU Grants. Dividends will be forfeited for any MSU Grants that do not vest. No MSU Grants were awarded in 2017 or 2018. At August 3, 2018, 20,334 shares for the 2016 MSU Grants were accrued.

Stock Options

Prior to 2012, stock options were granted with an exercise price equal to the market price of the Company’s stock on the grant date; those option awards generally vest at a cumulative rate of 33% per year beginning on the first anniversary of the grant date and expire ten years from the date of grant. No stock options were granted in 2016, 2017 or 2018.

A summary of the Company’s stock option activity as of August 3, 2018, and changes during 2018 are presented in the following table:


Fixed Options	Shares			Weighted- Average Price
Outstanding at July 28, 2017		4,000		$	32.86
Exercised		(4,000	)		32.86
Outstanding at August 3, 2018		--			--

The following table summarizes the total intrinsic values of options exercised during each of the three years:

		2018				2017				2016
Total intrinsic values of options exercised*		$	466			$	1,070			$	917

*The intrinsic value for stock options is defined as the difference between the current market value and the grant price.

Compensation Expense

The following table highlights the components of share-based compensation expense for each of the three years:

	2018		2017		2016
Nonvested stock awards and units	$	6,052	$	6,654	$	10,277
MSU Grants		925		1,804		2,925
Total compensation expense	$	6,977	$	8,458	$	13,202

The following table highlights the total unrecognized compensation expense related to the outstanding nonvested stock awards and nonvested stock units and the weighted-average periods over which the expense is expected to be recognized as of August 3, 2018:

	Nonvested Stock Awards		Nonvested Stock Units
Total unrecognized compensation	$	3,189	$	1,341
Weighted-average period in years		1.82		1.71

The following table highlights the total income tax benefit recognized in the Consolidated Statements of Income for each of the three years:

		2018				2017				2016
Total income tax benefit		$	774			$	2,740			$	3,819

During 2018, the Company issued 55,868 shares of its common stock resulting from the vesting of share-based compensation awards and stock option exercises. Related tax withholding payments on certain share-based compensation awards exceeded proceeds received from the exercise of stock options which resulted in a net reduction to shareholders’ equity of $3,816.