14. SHARE-BASED COMPENSATION PLANS

Compensation expense and related income tax benefit in connection with the Company’s share-based compensation plans for the years ended October 31, 2012, 2011 and 2010 were as follows:


Years Ended October 31,	2012			2011			2010
(in thousands)
Share-based compensation expense recognized in selling, general and administrative expenses before income taxes	$	10,236		$	9,191		$	4,071
Income tax benefit		(4,247	)		(3,805	)		(1,691	)

	$	5,989		$	5,386		$	2,380

The total shares issued upon the exercise of options under all share-based compensation plans was 967,123, 570,425 and 850,855 during the years ended October 31, 2012, 2011 and 2010, respectively. The total intrinsic value of the shares exercised was $9.8 million, $6.7 million and $8.4 million for the years ended October 31, 2012, 2011 and 2010, respectively. The total fair value of shares that vested during the years ended October 31, 2012, 2011 and 2010 was $8.2 million, $2.4 million and $8.1 million, respectively.

The Company has various stock option and stock award plans which provide or provided for the issuance of one or more of the following to key employees and directors: nonqualified stock options, RSUs and performance shares. The Company’s share-based compensation and employee stock purchase plans are described below.

Share-Based Compensation Plans

2006 Equity Incentive Plan

On May 2, 2006, stockholders of the Company approved the 2006 Equity Incentive Plan (the “2006 Equity Plan”). The 2006 Equity Plan was amended in March 2009 and 2012 to increase the total shares of common stock authorized for issuance to 10,279,265. At October 31, 2012, 2,420,058 shares of common stock were available for grant for future equity-based compensation awards under the plan.

Prior to the adoption of the 2006 Equity Plan, equity awards were made under the Time-Vested Incentive Stock Option Plan (the “Time-Vested Plan”), the 1996 Price-Vested Performance Stock Option Plan (the “1996 Price-Vested Plan”), and the 2002 Price-Vested Performance Stock Option Plan (the “2002 Price-Vested Plan” and the Executive Stock Option Plan, collectively with the Time-Vested Plan, the 1996 Price-Vested Plan and the 2002 Price-Vested Plan, the “Prior Plans”). No further grants can be made under the Prior Plans.

The terms and conditions governing existing options under the Prior Plans will continue to apply to the options outstanding under those plans. The 2006 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2006 Equity Plan. Certain of the awards under the 2006 Equity Plan may qualify as “performance-based” compensation under the Internal Revenue Code.

The status of the stock options, RSUs and performance shares granted under the 2006 Equity Plan as of October 31, 2012 is summarized below.

Stock Options

Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. Issued nonqualified stock options generally vest and become exercisable at a rate of 25% per year beginning one year after date of grant. However, terms of stock options can vary, and certain stock options granted on March 31, 2010 and January 10, 2011 will vest on the fifth anniversary of the award. Options expire seven years after the date of grant. Forfeitures are estimated on the date of grant based on historical forfeiture rates. The adjustment of the forfeiture rate may result in a cumulative adjustment in any period in which the forfeiture rate estimate is changed.

Stock option activity in the year ended October 31, 2012 is summarized below:


	Number of Shares (in thousands)			Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at October 31, 2011		1,676		$	20.91
Granted		231			18.31
Forfeitures		(110	)		20.62
Exercised		(104	)		19.23

Outstanding at October 31, 2012		1,693		$	20.68		4.39	$	285

Vested and exercisable at October 31, 2012		712		$	20.27		2.86	$	98

Total unrecognized share-based compensation cost (net of estimated forfeitures) related to unvested stock option awards at October 31, 2012 was $4.3 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 2.29 years.

The assumptions used in the option valuation model for the years ended October 31, 2012, 2011 and 2010 are shown in the table below:

2012

2011

2010

Expected life from the date of grant ⁽¹⁾

5.6 years

Expected stock price volatility ⁽²⁾

41.6%

39.2% – 40.4%

38.5% – 39.0%

Expected dividend yield ⁽³⁾

3.0%

2.3% – 2.6%

2.6% – 2.7%

Risk-free interest rate ⁽⁴⁾

0.8%

1.0% – 2.1%

1.7% – 2.6%

Weighted average fair value of option grants

5.25

6.52

6.37

(1)	The expected life for options granted under the 2006 Equity Plan is based on observed historical exercise patterns of the previously granted options adjusted to reflect the change in vesting and expiration dates.

(2)	The expected volatility is based on considerations of implied volatility from publicly traded and quoted options on the Company’s common stock and the historical volatility of the Company’s common stock.

(3)	The dividend yield is based on the historical dividend yield over the expected term of the options granted.

(4)	The risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with a remaining term equal to the expected term of the option.

RSUs and Dividend Equivalent Rights

The Company awards RSUs to eligible employees and the Company’s directors (each, a “Grantee”) that entitle the Grantee to receive shares of the Company’s common stock as the units vest based on service. In general, the receipt of RSUs is subject to the Grantee’s continuing employment. RSUs granted to eligible employees generally vest with respect to 50% of the underlying award on the second and fourth anniversary of the award. RSUs granted to directors vest over three years. Compensation expense is recognized ratably over the Grantee’s service period.

RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of the Company’s common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award. Performance shares granted prior to January 13, 2009 are credited with dividend equivalent rights that will be converted to performance shares at the fair value of the Company’s common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award. Performance shares granted on or after January 13, 2009 are credited with dividend equivalent rights that will be converted to performance shares at the fair market value of the Company’s common stock beginning after the performance targets have been satisfied and are subject to the same terms and conditions as the underlying award.

RSU activity in the year ended October 31, 2012 is summarized below:


	Number of Shares (in thousands)			Weighted- Average Grant Date Fair Value per Share
Outstanding at October 31, 2011		1,107		$	20.38
Granted		430			18.77
Issued (including 63 shares withheld for income taxes)		(224	)		20.68
Forfeited		(82	)		20.55

Outstanding at October 31, 2012		1,231		$	19.74

Vested at October 31, 2012		224		$	20.68

Total unrecognized compensation cost (net of estimated forfeitures) related to RSUs at October 31, 2012 was $14.7 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 2.18 years. The aggregate intrinsic value of the outstanding and vested RSUs as of October 31, 2012 was $23.4 million and $4.6 million, respectively.

Performance Shares

Performance shares consist of a contingent right to receive shares of the Company’s common stock based on performance targets adopted by the Compensation Committee. The number of performance shares that will vest is based on pre-established financial performance targets and typically a three-year service and performance period. Vesting of 0% to 150% of the indicated shares may occur depending on the extent to which targets are achieved.

Performance share activity in the year ended October 31, 2012 is summarized below:


	Number of Shares (in thousands)			Weighted- Average Grant Date Fair Value per Share
Outstanding at October 31, 2011		592		$	21.74
Granted		288			23.16
Issued (including 43 shares withheld for income taxes)		(122	)		18.00
Change in units based on performance		(27	)		23.32
Forfeited		(33	)		22.68

Outstanding at October 31, 2012		698		$	22.99

Vested at October 31, 2012		122		$	17.90

Total unrecognized compensation cost (net of estimated forfeitures) related to performance shares at October 31, 2012 was $7.2 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 1.41 years. These costs are based on estimated achievement of performance targets and estimated costs will be reevaluated periodically. The aggregate intrinsic value of the outstanding and vested performance shares as of October 31, 2012 was $13.3 million and $2.3 million, respectively.

During the year ended October 31, 2010, the Company determined that the financial performance targets, which were established in connection with certain performance share grants, were no longer probable of achievement. As a result, the Company reversed approximately $3.4 million ($2.0 million, net of taxes) of previously recorded share-based compensation expense. This adjustment was recorded in selling, general and administrative expenses.

Prior Plans

Time-Vested Plan

Under the Time-Vested Plan, the stock options become exercisable at a rate of 20% of the shares per year beginning one year after the date of grant and expire ten years plus one month after the date of grant. As of May 2, 2006, no further grants are authorized under this plan.

1996 and 2002 Price-Vested Plans

The Company has two price-vested plans: (1) the 1996 Price-Vested Plan and (2) the 2002 Price-Vested Plan. The two plans are substantially similar as each plan has pre-defined vesting prices that provide for accelerated vesting. Under each form of stock option agreement, if at the end of four years any of the stock price performance targets are not achieved, then the remaining stock options vest at the end of eight years from the date the stock options were granted. There have been no grants under these plans since the year ended October 31, 2005, therefore the remaining outstanding stock options under these plans will vest on the eighth anniversary of the award. Stock options vesting during the first year following grant do not become exercisable until after the first anniversary of grant. The stock options expire ten years after the date of grant. As of May 2, 2006, no further grants are authorized under these plans.

Executive Stock Option Plan (“Age-Vested Plan”)

Under the Age-Vested Plan, options are exercisable for 50% of the shares when the stock option holders reach their 61^st birthdays and the remaining 50% become exercisable on their 64^th birthdays. To the extent vested, the stock options may be exercised at any time prior to one year after termination of employment. Effective as of December 9, 2003, no further grants may be made under the plan.

The combined plan activity for the Time-Vested, Price-Vested and Age-Vested Plans in the year ended October 31, 2012 is summarized below:


	Number of Shares (in thousands)			Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at October 31, 2011		1,650		$	13.70 – $18.79
Exercised		(517	)		15.29 – 17.15
Forfeited or expired		(16	)		5.63 – 19.76

Outstanding at October 31, 2012		1,117		$	13.80 – $19.61		2.30 – 41.75	$	2,354

Vested and exercisable at October 31, 2012		849		$	11.36 – $19.61		2.30 – 42.30	$	1,156

As of October 31, 2012, all outstanding shares under the Time-Vested and Price-Vested Plans are vested and exercisable.

Total unrecognized compensation cost (net of estimated forfeitures) related to unvested stock options under the Age-Vested Plan at October 31, 2012 was $0.4 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 7.26 years.

Employee Stock Purchase Plan

On March 9, 2004, the stockholders of the Company approved the 2004 Employee Stock Purchase Plan (the “2004 Employee Stock Purchase Plan”). The 2004 Employee Stock Purchase Plan was amended in March 2010 to increase the total shares of common stock authorized for issuance to 3,000,000. Effective May 1, 2006, the plan is no longer considered compensatory and the values of the awards are no longer treated as share-based compensation expense. Additionally, as of this date, the purchase price became 95% of the fair value of the Company’s common stock price on the last trading day of the month. Employees may designate up to 10% of their compensation for the purchase of stock, subject to a $25,000 annual limit. Employees are required to hold their shares for a minimum of six months from the date of purchase.

The weighted average fair values of the purchase rights granted in the years ended October 31, 2012, 2011 and 2010 under the new plan were $1.05, $1.16 and $1.03, respectively. During the years ended October 31, 2012, 2011 and 2010, 200,108, 165,455 and 190,340 shares of stock were issued under the plan at a weighted average price of $19.93, $22.02 and $19.65, respectively. The aggregate purchases in the years ended October 31, 2012, 2011 and 2010 were $4.0 million, $3.6 million and $3.7 million, respectively. At October 31, 2012, 737,271 shares remained unissued under the plan.