Stock-Based Compensation

12 Months Ended

Jul. 31, 2023

Share-Based Payment Arrangement, Noncash Expense [Abstract]

Stock-Based Compensation

Note 13. Stock-Based Compensation

The Company recognizes compensation expense for all stock-based awards based on the grant date fair value of the award. Stock-based awards consist primarily of non-qualified stock options, performance-based awards, restricted stock awards and restricted stock units. Grants related to restricted stock awards and restricted stock units are immaterial. The Company issues treasury shares for stock options and performance-based awards.

Stock Options

The exercise price of options granted is equal to the market price of the Company’s common 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.

Pretax stock-based compensation expense associated with options was $12.4 million, $11.6 million and $10.8 million for the years ended July 31, 2023, 2022 and 2021, respectively.

Fair value is calculated using the Black-Scholes option pricing model. The weighted average fair value for options granted during the years ended July 31, 2023, 2022 and 2021 was $15.67, $14.24 and $10.23 per share, respectively.

The fair value of these awards was determined using the following inputs:

	Year Ended July 31,
	2023		2022		2021
Risk-free interest rate	3.8% - 4.2%		1.2% - 1.8%		0.5% - 1.3%
Expected volatility	26.8% - 27.5%		26.0% - 27.0%		25.4% - 26.6%
Expected dividend yield	1.6	%	1.6	%	1.6	%
Expected life:
Director grants	8 years		8 years		8 years
Officer grants	7 years		7 years		8 years
Non-officer grants	7 years		7 years		7 years

Option activity was as follows:

	Options	Weighted Average Exercise Price
Balance outstanding as of July 31, 2020	6,533,979	$	42.44
Granted	1,004,631	46.61
Exercised	(1,030,938)	36.00
Expired/forfeited	(62,929)	49.95
Balance outstanding as of July 31, 2021	6,444,743	44.05
Granted	898,726	59.18
Exercised	(365,267)	37.02
Expired/forfeited	(51,041)	53.15
Balance outstanding as of July 31, 2022	6,927,161	46.32
Granted	920,816	51.35
Exercised	(1,006,602)	40.48
Expired/forfeited	(63,968)	53.47
Balance outstanding as of July 31, 2023	6,777,407	$	47.80

The total intrinsic value of options exercised during the years ended July 31, 2023, 2022 and 2021 was $20.2 million, $7.8 million and $22.6 million, respectively.

The number of shares authorized as of July 31, 2023 for outstanding options and future grants was 8,585,779. Forfeited options are recorded as an offset to operating expenses in the Consolidated Statements of Earnings in the period in which they occur.

Outstanding and exercisable stock options as of July 31, 2023 were as follows:

Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price
$28.00 to $37.99	672,703	2.3	$	29.24	672,703	2.3	$	29.24
$38.00 to $43.99	1,393,425	2.3	41.29		1,393,425	2.3	41.29
$44.00 to $49.99	1,452,757	5.9	45.96		1,162,081	5.5	45.93
$50.00 to $55.99	1,656,918	7.8	51.34		769,671	6.2	51.75
$56.00 and above	1,601,604	6.9	59.27		995,816	6.0	59.17
	6,777,407	5.5	$	47.80	4,993,696	4.4	$	45.93

As of July 31, 2023, the aggregate intrinsic value of stock options outstanding and exercisable was $101.9 million and $84.4 million, respectively.

For the year ended July 31, 2023, activity for non-vested stock options that contain vesting provisions was as follows:

	Options	Weighted Average Grant Date Fair Value
Balance outstanding as of beginning of year	1,809,473	$	12.31
Granted	920,816	15.67
Vested	(895,862)	11.78
Forfeited	(50,716)	13.61
Balance outstanding as of end of year	1,783,711	$	14.27

As of July 31, 2023, there was $8.1 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 2024, 2025 and 2026.

Performance-Based Awards

Performance-based awards are payable in common stock and are based on a formula that measures Company performance over a three year period. These awards are settled after three years with payouts ranging from 0% to 200% of the target award depending on achievement. Pretax performance-based awards expense was $6.3 million, $7.2 million and $1.9 million for the years ended July 31, 2023, 2022 and 2021, respectively.

The weighted average grant date fair value related to the Company’s performance-based awards was as follows:

	Year Ended July 31,
	2023		2022		2021
Weighted average grant date fair value	$	50.89	$	59.40	$	46.06

Performance-based awards for non-vested activity were as follows:

	Performance Shares	Weighted Average Grant Date Fair Value
Balance outstanding as of July 31, 2022	188,206	$	52.20
Granted	113,100	50.89
Vested	(98,853)	46.06
Forfeited	(7,692)	54.76
Balance outstanding as of July 31, 2023	194,761	$	54.46

As of July 31, 2023, there was $5.7 million of total unrecognized compensation expense related to non-vested performance-based awards, which is expected to be recognized over the remaining vesting period during fiscal 2024, 2025 and 2026. Forfeited performance-based awards are recorded as an offset to operating expenses in the Consolidated Statements of Earnings in the period in which they occur.