Stock-Based Compensation

2016 Equity Incentive Plan

At April 30, 2019, 281,044 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At April 30, 2019, 793,110 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights.

2006 Equity Incentive Plan

The 2006 Plan was terminated on January 7, 2016 in conjunction with the adoption of the 2016 Plan. At April 30, 2019, options to purchase 40,000 shares of common stock were outstanding under the 2006 Plan. No additional awards will be granted under this plan.

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:



	Three Months Ended April 30,				Nine Months Ended April 30,
	2019		2018		2019		2018
Cost of sales	$	245	$	167	$	769	$	463
Operating expenses:
Selling	538		559		1,684		1,188
General and administrative⁽¹⁾	4,874		1,641		9,249		5,231
Research and development	65		76		183		151
Total operating expenses	5,477		2,276		11,116		6,570
Stock-based compensation expense	$	5,722	$	2,443	$	11,885	$	7,033

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(1)	The increase in stock-based compensation expense primarily relates to the accelerated vesting of awards resulting from organizational leadership changes.

At April 30, 2019, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $15,427 with a remaining weighted average period of 14 months over which such expense is expected to be recognized.

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:



	Nine Months Ended April 30,
	2019		2018
Volatility of common stock	27.54	%	26.60	%
Average volatility of peer companies	36.55	%	33.72	%
Average correlation coefficient of peer companies	27.18	%	32.26	%
Risk-free interest rate	2.93	%	1.62	%

A summary of nonvested stock award activity for the nine months ended April 30, 2019 follows:



	Number of Time-based Awards		Number of Performance-based Awards		Number of Market-based Awards		Number of Total Awards		Weighted Average Fair Value
July 31, 2018	168,320		26,076		17,710		212,106		$	88.87
Granted	143,144		35,981		25,320		204,445		$	88.48
Vested⁽¹⁾	(95,459	)	(12,742	)	(4,335	)	(112,536	)	$	79.53
Forfeited	(10,251	)	(7,034	)	(5,686	)	(22,971	)	$	98.73
April 30, 2019	205,754		42,281		33,009		281,044		$	91.86

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(1)	The aggregate fair value of all nonvested stock awards which vested was approximately $8,952.

A summary of stock option activity for the nine months ended April 30, 2019 follows:



	Number of shares		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2018	70,000		$	38.60
Exercised	(30,000	)	$	31.81
Outstanding at April 30, 2019	40,000		$	43.70	0.82	$	1,010
Exercisable at April 30, 2019	40,000		$	43.70	0.82	$	1,010

During the nine months ended April 30, 2019, 5,000 options vested, with an aggregate fair value of approximately $277. During the nine months ended April 30, 2019, 30,000 options were exercised, with an aggregate fair value of approximately $1,787. At April 30, 2019, all outstanding options were vested.

Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the nine months ended April 30, 2019, income tax deductions of $2,465 were generated, of which $1,902 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $563 was recorded as a reduction in income tax expense. For the nine months ended April 30, 2018, income tax deductions of $3,406 were generated, of which $1,394 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $2,012 was recorded as a reduction in income tax expense.