Stock-Based Compensation

The Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options to purchase shares of Class A Nonvoting Common Stock, restricted stock units ("RSUs"), or restricted and unrestricted shares of Class A Nonvoting Common Stock to employees and non-employee directors.

The options issued under the plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Options issued under the plan, referred to herein as “service-based” stock options, generally expire 10 years from the date of grant.

Restricted shares and RSUs issued under the plan have an issuance price equal to the fair market value of the underlying stock at the date of grant. The RSUs granted under the plan generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Shares issued under the plan are referred to herein as "service-based" restricted shares and RSUs.

As of October 31, 2015, the Company has reserved 4,968,479 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted shares and 2,238,223 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted and unrestricted shares under the active plan. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares under the plan.

The Company recognizes the compensation cost of all share-based awards at the time it is deemed probable the award will vest. This cost is recognized on a straight-line basis over the vesting period of the award. If it is determined that it is unlikely the award will vest, the expense recognized to date for the award is reversed in the period in which this is evident and the remaining expense is not recorded. Total stock-based compensation expense recognized by the Company during the three months ended October 31, 2015 and 2014, was $2,596 ($1,609 net of taxes) and $1,319 ($818 net of taxes), respectively.

As of October 31, 2015, total unrecognized compensation cost related to stock-based compensation awards was $21,053 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 3.0 years.

The Company has estimated the fair value of its service-based stock option awards granted during the three months ended October 31, 2015 and 2014, using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:



	Three months ended October 31,
Black-Scholes Option Valuation Assumptions	2015			2014
Expected term (in years)	6.12			6.05
Expected volatility	28.59		%	30.27		%
Expected dividend yield	2.59		%	2.48		%
Risk-free interest rate	1.64		%	1.91		%
Weighted-average market value of underlying stock at grant date	$	19.97		$	22.66
Weighted-average exercise price	$	19.97		$	22.66
Weighted-average fair value of options granted during the period	$	4.58		$	6.10

The Company uses historical data regarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected to be outstanding. Expected volatilities are based on the historical volatility of the Company’s stock. The expected dividend yield is based on the Company’s historical dividend payments and historical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the length of time corresponding to the expected term of the option. The market value is calculated as the average of the high and the low stock price on the date of the grant.

A summary of stock option activity under the Company’s share-based compensation plans for the three months ended October 31, 2015 is presented below:



Service-Based Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at July 31, 2015	3,500,951	$	29.64
New grants	871,993	19.97
Exercised	0	—
Forfeited or expired	(152,462)	29.50
Outstanding at October 31, 2015	4,220,482	$	27.64	6.0	$	2,953
Exercisable at October 31, 2015	2,923,276	$	30.32	4.5	$	390

There were 2,923,276 and 3,339,992 options exercisable with a weighted average exercise price of $30.32 and $30.94 at October 31, 2015 and 2014, respectively. The total fair value of stock options vested during the three months ended October 31, 2015 and 2014, was $2,964 and $3,684, respectively.

No options were exercised during the three months ended October 31, 2015. The total intrinsic value of options exercised during the three months ended October 31, 2014, based upon the average market price at the time of exercise during the period, was $7. The cash received from the exercise of options and the tax benefit on these options during the three months ended October 31, 2014 was $91 and $3, respectively.

The following table summarizes the RSU activity under the Company's share-based compensation plans for the three months ended October 31, 2015:



Service-Based RSUs	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2015	677,454		$	24.72
New grants	168,566		19.98
Vested	(69,829	)	25.00
Forfeited	(28,194	)	24.00
Outstanding at October 31, 2015	747,997		$	23.66

The service-based RSUs granted during the three months ended October 31, 2014 had a weighted-average grant date fair value of $23.45.

The aggregate intrinsic value of unvested RSUs expected to vest at October 31, 2015 was $17,017. The total fair value of RSUs vested during the three months ended October 31, 2015 and 2014, was $1,419 and $762, respectively.