Stock Compensation Plan

The Company has a share award plan (the “Plan”) which has been approved by the Company’s stockholders. Under the Plan, up to 4.4 million shares of common stock could be issued in the form of options, stock appreciation rights, restricted shares, restricted share units, performance shares, performance share units, dividend equivalents or other share-based awards to employees, directors or consultants of the Company or its subsidiaries or affiliates. The terms of awards granted under the Plan, including exercise price, vesting period and life, are set by the Compensation Committee of the Board of Directors. All share-based awards (except for restricted shares and restricted share units) granted under the Plan have a life of ten years. Most awards vest ratably over three years; however, some have been granted with different vesting schedules. Of the awards outstanding, none have been granted to non-employees (except those granted to non-employee members of the Board of Directors of the Company) under the Plan. At July 31, 2018, approximately 3.8 million share based awards were available to be granted under the Plan.

The fair value of stock-settled stock appreciation rights (“SARs”) granted in the years ended July 31, 2018, 2017 and 2016 were estimated on the date of grant using a lattice-based option valuation model that applies the assumptions noted in the table below. A lattice-based model considers factors such as exercise behavior, and assumes employees will exercise equity awards at different times over the contractual life of the equity awards. As a lattice-based model considers these factors, and is more flexible, the Company considers it to be a better method of valuing equity awards than a closed-form Black-Scholes model. Because lattice-based option valuation models incorporate ranges of assumptions for inputs, those ranges are disclosed. Expected volatility is based on historical volatility of the Company’s stock. The Company uses historical data to estimate equity award exercises and employee terminations within the valuation model; separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes. The expected term of equity awards granted is derived from the output of the option valuation model and represents the period of time that equity awards granted are expected to be outstanding; the range given below results from certain groups of employees exhibiting different behavior. The risk-free rate for periods within the contractual life of the equity award is based on the United States Treasury yield curve in effect at the time of grant.



	Year Ended July 31,
	2018	2017	2016
Expected volatility	40.0%	40.3%	40.4%
Expected dividends	2.0%	2.2%	2.2%
Expected term (average in years)	5.8-6.4	5.5-6.2	5.3-5.9
Risk-free rate	1.2-2.3%	0.5-1.5%	0.3-2.2%

The Company records actual forfeitures related to unvested awards upon employee terminations.

A summary of aggregate SARs award activity under the Plan as of July 31, 2018, 2017 and 2016, and changes during the years then ended is presented below (in thousands, except exercise price and contractual term):



	Awards		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at August 1, 2015	2,385		$	47.96
Granted	198		$	113.67
Exercised	(180	)	$	49.79
Forfeited or expired	(22	)	$	80.42
Outstanding at July 31, 2016	2,381		$	52.98
Granted	143		$	174.42
Exercised	(215	)	$	60.05
Forfeited or expired	(19	)	$	108.06
Outstanding at July 31, 2017	2,290		$	59.12
Granted	86		$	237.86
Exercised	(1,049	)	$	33.25
Forfeited or expired	(3	)	$	172.03
Outstanding at July 31, 2018	1,324		$	91.01	5.3 years	$	246,198
Vested and expected to vest at July 31, 2018	1,309		$	90.07	5.3 years	$	244,711
Exercisable at July 31, 2018	1,092		$	71.54	4.7 years	$	224,231

The weighted-average grant-date estimated fair value of SARs granted during the years ended July 31, 2018, 2017 and 2016 was $78.07, $50.78 and $35.20, respectively. The total intrinsic value of SARs exercised during the years ended July 31, 2018, 2017 and 2016 was $213.8 million, $22.6 million and $13.1 million, respectively. The Company had 169,000, 247,000 and 302,000 SARs that vested during the years ended July 31, 2018, 2017 and 2016, respectively. These awards had a total estimated fair value of $18.5 million, $19.6 million and $10.8 million at the date of vesting for the years ended July 31, 2018, 2017 and 2016, respectively.

A summary of the status of the Company’s nonvested SARs as of July 31, 2018 and changes during the year then ended is presented below (in thousands, except fair value amounts):



	Awards	Weighted-Average Grant-Date Fair Value
Outstanding at July 31, 2017	318	$	42.46
Granted	86	$	78.07
Vested	(169)	$	38.59
Forfeited	(3)	$	54.32
Nonvested at July 31, 2018	232	$	56.72

A summary of the status of the Company’s nonvested restricted share units as of July 31, 2018 and changes during the year then ended is presented below (in thousands, except fair value amounts):



	Awards	Weighted-Average Grant-Date Fair Value
Nonvested at July 31, 2017	211	$	119.97
Granted	77	$	215.14
Vested	(101)	$	112.42
Forfeited	(11)	$	159.78
Nonvested at July 31, 2018	176	$	163.83

The Company granted 77,000 restricted share units during the year ended July 31, 2018 with a weighted-average grant-date estimated fair value of $215.14. The Company granted 91,000 restricted share units during the year ended July 31, 2017 with a weighted-average grant-date estimated fair value of $154.19. The Company granted 142,000 restricted share units during the year ended July 31, 2016 with a weighted-average grant-date estimated fair value of $102.20. The Company had 101,000, 121,000 and 134,000 restricted share units that vested during the years ended July 31, 2018, 2017 and 2016, respectively. These units had a total estimated fair value of $23.5 million, $19.3 million and $14.6 million at the date of vesting for the years ended July 31, 2018, 2017 and 2016, respectively.

As of July 31, 2018, there was $23.0 million of total unrecognized compensation expense related to nonvested share-based compensation arrangements granted under the Plan, of which $14.0 million, $7.9 million and $1.1 million of expense is expected to be recognized in the years ending July 31, 2019, 2020 and 2021, respectively, assuming no future share-based awards are granted. The tax benefit realized or expected to be realized from SARs exercised and restricted stock units vested was $79.7 million, $15.5 million and $10.3 million for the years ended July 31, 2018, 2017 and 2016, respectively.

The Company has a policy of using either authorized and unissued shares or treasury shares, including shares acquired by purchase in the open market, to satisfy equity award exercises.