NOTE 10 — STOCK-BASED COMPENSATION

The Company’s board of directors may make awards under its 2011 Stock Plan (the “Stock Plan”) to officers, directors and key employees. Awards may include incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”), and restricted or unrestricted common stock. ISOs granted under the Stock Plan shall have an exercise price per share at least equal to the common stock’s market value per share at the date of grant, shall have a term no longer than ten years, and typically become fully exercisable one year from the date of grant. NSOs may be granted at an exercise price per share that differs from the common stock’s market value per share at the date of grant, may have up to a ten-year term, and typically become exercisable one year from the date of award.

As of July 31, 2017, there were 1,071,650 shares of the Company’s common stock reserved for issuance under the Company’s stock option plans (including the Stock Plan and an expired predecessor plan), including 330,000 shares of the Company’s common stock available for future awards under the Stock Plan.

Summaries of activity under the Company’s stock option plans for the six months ended July 31, 2017 and 2016, along with corresponding weighted average per share amounts, are presented below (shares in thousands):

	Shares		Exercise Price		Remaining Term (years)	Fair Value
Outstanding, February 1, 2017	707		$	39.04	7.82	$	10.22
Granted	125		$	63.58
Exercised	(80	)	$	30.48
Forfeited	(10	)	$	71.75

Outstanding, July 31, 2017	742		$	43.66	7.79	$	11.56

Exercisable, July 31, 2017	462		$	28.84	6.72	$	7.75


	Shares		Exercise Price		Remaining Term (years)	Fair Value

Outstanding, February 1, 2016	1,064		$	26.38	6.36	$	6.91
Granted	105		$	36.09
Exercised	(195	)	$	21.59

Outstanding, July 31, 2016	974		$	28.39	7.03	$	7.51

Exercisable, July 31, 2016	704		$	25.55	6.55	$	6.85

The changes in the number of non-vested options to purchase shares of common stock for the six months ended July 31, 2017 and 2016, and the weighted average fair value per share for each number, are presented below (shares in thousands):

	Shares		Fair Value
Non-vested, February 1, 2017	270		$	14.93
Granted	125		$	16.19
Vested	(105	)	$	9.66
Forfeited	(10	)	$	19.14

Non-vested, July 31, 2017	280		$	17.83


	Shares		Fair Value

Non-vested, February 1, 2016	300		$	8.97
Granted	105		$	9.66
Vested	(135	)	$	8.99

Non-vested, July 31, 2016	270		$	9.22

Compensation expense amounts related to stock options were $1.2 million and $0.6 million for the three months ended July 31, 2017 and 2016, respectively, and were $2.3 million and $1.3 million for the six months ended July 31, 2017 and 2016, respectively. At July 31, 2017, there was $2.7 million in unrecognized compensation cost related to outstanding stock options. The Company expects to recognize the compensation expense for these awards over the next twelve months. The total intrinsic values of the stock options exercised during the six months ended July 31, 2017 and 2016 were $2.8 million and $3.9 million, respectively. At July 31, 2017, the aggregate market values of the shares of common stock subject to outstanding and exercisable stock options that were “in-the-money” as of July 31, 2017 exceeded the aggregate exercise prices of such options by $16.5 million and $16.4 million, respectively.

For companies with limited stock option exercise experience, guidance provided by the SEC permits the use of a “simplified method” in developing the estimate of the expected term of a “plain-vanilla’’ share option, based on the average of the vesting period and the option term, which the Company used to estimate the expected terms of its stock options. However, the Company believes that its stock option exercise activity, particularly over the last two years, has become sufficient to provide it with a reasonable basis on which to estimate expected lives. Accordingly, the estimated expected life used in the determination of stock options awarded so far in calendar year 2017 was 3.35 years. The simplified method would have resulted in the use of 5.50 years as the estimated expected life of each of these stock options. As a result, the aggregate fair value of this group of stock options was reduced by $1.2 million, or approximately 24%. The effect of the change on the amount of stock option compensation expense recorded during the three and six months ended July 31, 2017 were reductions of $0.3 million and $0.5 million, respectively.

The fair values of each stock option granted in the six-month periods ended July 31, 2017 and 2016 were estimated on the corresponding dates of award using the Black-Scholes option-pricing model based on the following weighted average assumptions:

	Six Months Ended July 31,
	2017		2016
Dividend yield	1.10	%	1.96	%
Expected volatility	36.01	%	33.85	%
Risk-free interest rate	1.57	%	1.36	%
Expected life (in years)	3.35		5.50