Stock-Based Compensation

12 Months Ended

Jul. 31, 2020

Share-based Payment Arrangement, Noncash Expense [Abstract]

In November 2019, the Company’s stockholders approved the adoption of the 2019 Master Stock Incentive Plan (2019 Plan), which replaced the 2010 Master Stock Incentive Plan (2010 Plan). Consistent with the 2010 Plan, the 2019 Plan allows for granting of nonqualified stock options, incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents, and other stock-based awards.

Stock Options Options granted to key employees under the 2019 Plan and 2010 Plan have an exercise price equal to the market price of the Company’s comment stock at the date of the grant. Options are generally exercisable for up to 10 years from the date of grant and vest in equal increments over three years. For the years ended July 31, 2020, 2019 and 2018, the Company recorded pretax stock-based compensation expense associated with stock options of $10.4 million, $9.8 million and $8.1 million, respectively. Compensation costs for stock-based payments are included in selling, general and administrative expenses. The Company issues treasury shares upon option exercise. The Company also recorded tax benefits associated with this compensation expense of $1.7 million, $2.0 million and $1.9 million for the years ended July 31, 2020, 2019 and 2018, respectively.

Stock-based employee compensation expense is recognized using the fair value method for all stock option awards. The Company determined the fair value of these awards using the Black-Scholes option pricing model with the following assumptions:


	Year Ended July 31,
	2020		2019		2018
Risk-free interest rate	0.8% - 1.9%		2.1% - 3.1%		2.0% - 2.9%
Expected volatility	21.0% - 23.7%		16.0% - 21.5%		18.2% - 20.6%
Expected dividend yield	1.6	%	1.6	%	1.6	%

Expected life:
Director and officer grants	8 years		8 years		8 years
Non-officer original grants	7 years		7 years		7 years

The weighted average fair value for options granted during the years ended July 31, 2020, 2019 and 2018 was $10.93, $12.27 and $9.29 per share, respectively, using the Black-Scholes pricing model.

The following table summarizes stock option activity for the years ended July 31, 2020, 2019 and 2018:


	Options Outstanding	Weighted Average Exercise Price ⁽¹⁾
Outstanding at July 31, 2017	6,685,551	$	32.60
Granted	881,050	45.70
Exercised	(738,635)	26.47
Canceled	(42,154)	39.52
Outstanding at July 31, 2018	6,785,812	34.93
Granted	908,925	58.02
Exercised	(1,103,054)	25.07
Canceled	(60,433)	50.57
Outstanding at July 31, 2019	6,531,250	39.66
Granted	944,094	51.94
Exercised	(845,086)	30.35
Canceled	(96,279)	52.72
Outstanding at July 31, 2020	6,533,979	$	42.44

(1) Weighted average shares are calculated using the Black-Scholes model.

The total intrinsic value of options exercised during the years ended July 31, 2020, 2019 and 2018 was $18.3 million, $30.3 million and $16.0 million, respectively.

The number of shares reserved at July 31, 2020 for outstanding options and future grants was 11,514,490. Shares reserved consist of shares available for grant plus all outstanding options.

The following table summarizes information concerning outstanding and exercisable options as of July 31, 2020:


Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$28.00 to $32.49	956,847	4.3	$	28.43	956,847	$	28.43
$32.50 to $37.49	1,047,737	2.1	34.39		1,047,737	34.39
$37.50 to $42.49	1,225,700	4.2	40.30		1,225,700	40.30
$42.50 to $47.49	1,537,884	6.5	43.99		1,254,073	43.75
$47.50 and above	1,765,811	8.7	54.95		304,691	57.52
	6,533,979	5.6	$	42.44	4,789,048	$	38.63

At July 31, 2020, the aggregate intrinsic value of shares outstanding and exercisable was $50.2 million and $49.3 million, respectively.

The following table summarizes the status of options that contain vesting provisions:


	Options	Weighted Average Grant Date Fair Value
Non-vested at July 31, 2019	1,711,438	$	11.06
Granted	944,094	10.93
Vested	(843,776)	10.68
Canceled	(66,825)	10.81
Non-vested at July 31, 2020	1,744,931	$	11.18

The total fair value of options vested during years ended July 31, 2020, 2019 and 2018, was $40.8 million, $44.5 million and $42.0 million, respectively.

As of July 31, 2020, there was $7.2 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over the remaining vesting period during fiscal 2021, 2022 and 2023.

Performance-based awards Consistent with the 2010 Plan, the 2019 Plan also allows for the granting of performance-based awards to a limited number of key executives. As administered by the Human Resources Committee of the Company’s Board of Directors, these performance-based awards are payable in common stock and are based on a formula that measures performance of the Company over a three year period. These awards are settled or forfeited after three years with payouts ranging from zero to 200% of the target award value depending on achievement. Performance-based award expense under these plans totaled $3.4 million, $3.8 million and $7.5 million in the years ended July 31, 2020, 2019 and 2018, respectively.

The weighted average grant date fair value related to the Company’s performance share awards are as follows:


	Year Ended July 31,
	2020		2019		2018
Weighted average grant date fair value	$	51.61	$	58.35	$	45.43

The table below summarizes the activity during fiscal 2020 for non-vested performance share awards:


	Performance Shares	Weighted Average Grant Date Fair Value
Non-vested at July 31, 2019	174,100	$	52.87
Granted	100,500	51.61
Vested	(73,900)	45.43
Canceled/forfeited	(2,500)	58.35
Non-vested at July 31, 2020	198,200	$	54.93

As of July 31, 2020, there was $2.9 million of total unrecognized compensation expense related to non-vested performance shares. This unvested expense is expected to be recognized over the remaining vesting period.