SHARE-BASED COMPENSATION PLANS

We use various share-based compensation plans to provide incentives for our key employees and directors. Currently, these incentives primarily consist of RSUs, various performance shares, and stock options.

On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan (the “2006 Equity Plan”). 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 IRC.

In 2014, we began issuing TSR-based performance share awards in lieu of stock options. These TSR awards will be earned on the basis of our total shareholder return measured against the total shareholder return of companies in the Standard & Poor’s Small Cap 600 Index (“S&P 600”) over a three-year period.

The 2006 Equity Plan was amended in March 2015 to increase the total shares of common stock authorized for issuance to 11,679,265. At October 31, 2015, 2,311,075 shares of common stock were available for grant for future equity-based compensation awards under the plan. In addition, there are certain plans under which we can no longer issue awards, although awards outstanding under these plans may still vest and be exercised.

We also maintain an employee stock purchase plan, which our stockholders approved on March 9, 2004 (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 that date, the purchase price became 95% of the fair value of our 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. At October 31, 2015, 241,148 shares remained unissued under the plan.

Compensation Expense by Type of Award and Related Income Tax Benefit



	Years Ended October 31,
(in millions)	2015			2014			2013
RSUs	$	6.9		$	7.3		$	5.3
Performance shares	6.5			6.4			5.8
Stock options	0.8			2.1			1.7
Share-based compensation expense before income taxes	14.2			15.8			12.8
Income tax benefit	(5.9		)	(6.7		)	(5.0		)
Share-based compensation expense, net of taxes	$	8.3		$	9.1		$	7.8

RSUs and Dividend Equivalent Rights

We award RSUs to eligible employees and our directors (each, a “Grantee”) that entitle the Grantee to receive shares of our common stock as the units vest based on service. In general, the receipt of RSUs is subject to the Grantee’s continuing employment or service as a director, as the case may be. 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.

RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of our common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award.

RSU Activity



	Number of Shares (in millions)		Weighted-Average Grant Date Fair Value per Share
Outstanding at November 1, 2014	1.4		$	23.4
Granted	0.4		29.3
Vested (including 0.1 shares withheld for income taxes)	(0.4	)	22.2
Forfeited	(0.1	)	24.4
Outstanding at October 31, 2015	1.3		25.8

At October 31, 2015, total unrecognized compensation cost, net of estimated forfeitures, related to RSUs was $18.9 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.7 years. In 2015, 2014, and 2013, the weighted-average grant date fair value per share of awards granted was $29.3, $27.8, and $24.9, respectively. In 2015, 2014, and 2013, the total fair value of RSUs that vested was $9.4 million, $5.4 million, and $5.1 million, respectively.

Stock Options

Typically, stock options vest and become exercisable at a rate of 25% per year beginning one year after the date of grant. However terms of stock options can vary, and certain stock options granted on January 10, 2011 will vest on the fifth anniversary of the award. Options typically expire seven years after the date of grant. No stock options were granted in 2015 and 2014. All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.

Stock Option Activity



	Number of Shares (in millions)		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)⁽²⁾	Aggregate Intrinsic Value⁽¹⁾ (in millions)
Outstanding at November 1, 2014	1.8		$	20.2
Forfeited or expired	(0.2	)	22.3
Exercised	(0.8	)	20.2
Outstanding at October 31, 2015	0.8		$	19.7	3.2	$	6.7
Exercisable at October 31, 2015	0.3		$	18.5	3.2	$	3.2

⁽¹⁾ Amount by which the current market price of our common stock on October 31, 2015 exceeds the exercise price.

⁽²⁾Excludes contractual terms associated with plans prior to the 2006 Equity Plan due to the uncertainty of expiration.

At October 31, 2015, total unrecognized compensation cost, net of estimated forfeitures, related to stock option grants was $0.8 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.6 years. For 2015, 2014, and 2013, the total intrinsic value of stock options exercised was $8.8 million, $3.8 million, and $4.1 million, respectively. In 2013, the weighted-average grant date fair value per share of awards granted was $7.5. In 2015, 2014, and 2013, the total fair value of options that vested was $2.1 million, $1.5 million, and $1.4 million, respectively.

Performance Shares, Including TSR Performance Shares

Performance shares consist of a contingent right to receive shares of our common stock based on performance targets adopted by our Compensation Committee. Performance shares are credited with dividend equivalent rights that will be converted to performance shares at the fair market value of our common stock beginning after the performance targets have been satisfied and are subject to the same terms and conditions as the underlying award.

For certain performance share awards, the number of performance shares that will vest is based on pre-established internal financial performance targets and typically a three-year service and performance period. For TSR awards, the number of performance shares that will vest is based on our total shareholder return relative to the S&P 600 at the time of grant over the respective three-year performance period. Vesting of 0% to 150% of the awards originally granted may occur depending on the respective performance metrics under both award types.

Performance Share Activity



	Number of Shares (in millions)		Weighted-Average Grant Date Fair Value per Share
Outstanding at November 1, 2014	1.1		$	23.9
Granted	0.5		29.8
Vested (including 0.1 shares withheld for income taxes)	(0.2	)	23.0
Performance adjustments	(0.1	)	25.1
Forfeited	(0.2	)	24.3
Outstanding at October 31, 2015	1.1		$	26.4

At October 31, 2015, total unrecognized compensation cost related to performance stock awards was $10.0 million, which is expected to be recognized ratably over a weighted-average vesting period of 1.3 years. Except for TSR performance shares, these costs are based on estimated achievement of performance targets and estimated costs will be reevaluated periodically. For our TSR performance shares, these costs are based on the fair value of awards at the grant date and are recognized on a straight-line basis over the service period of 3 years.

In 2015, 2014, and 2013, the weighted-average grant date fair value per share of awards granted was $29.8, $27.7, and $20.5, respectively. The total fair value of performance shares that vested was $5.0 million in both 2015 and 2014 and $2.2 million in 2013.

Method of Accounting and Our Assumptions

In 2015 and 2014, we used the Monte Carlo simulation valuation technique to estimate the fair value of TSR performance share grants. In the year where stock options were granted, we used the Black-Scholes options-pricing model to estimate the grant date fair value of stock option grants.

Assumptions



	Monte Carlo			Monte Carlo			Black-Scholes
	2015			2014			2013
Expected life⁽¹⁾	2.15 years			2.15 years			5.37 years
Expected stock price volatility⁽²⁾	18.9		%	19.0		%	38.8		%
Expected dividend yield⁽³⁾	2.4		%	2.4		%	2.4		%
Risk-free interest rate⁽⁴⁾	0.8		%	0.6		%	1.8		%
Stock price⁽⁵⁾	$	30.3		$	26.6		N/A*
Weighted average fair value of option grants	N/A			N/A			$	7.5



*	Not Applicable

(1) For TSR awards valued under the Monte Carlo simulation model, the expected life represents the remaining performance period of the awards. For stock options valued under the Black-Scholes options-pricing model, the expected life is based on observed historical exercise patterns of the previously granted options adjusted to reflect the change in vesting and expiration dates.

(2) For the Monte Carlo simulation model, the expected volatility for each grant is determined based on the historical volatility of our common stock over a period equal to the remaining term of the performance period from the date of grant for all awards. For the Black-Scholes options-pricing model, the expected volatility is based on considerations of implied volatility from publicly traded and quoted options on our common stock and the historical volatility of our common stock.

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

(4) For the Monte Carlo simulation and Black-Scholes options-pricing models, the risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with varying remaining terms. For TSR awards valued under the Monte Carlo simulation model, the remaining term is determined over a period of time that is commensurate with the performance period from the grant date. For stock option awards valued under the Black-Scholes options-pricing models, the remaining term is equal to the expected term of the option.

(5) The stock price is the closing price of our common stock on the valuation date.

Employee Stock Purchase Plan



	Years Ended October 31,
(in millions, except per share amounts)	2015		2014		2013
Weighted average fair value of granted purchase rights per share	$	1.5	$	1.4	$	1.1
Common stock issued	0.2		0.2		0.2
Fair value of common stock issued per share	$	28.8	$	25.8	$	21.3
Aggregate purchases	$	4.7	$	4.3	$	4.0