Stock-Based Compensation

2016 Equity Incentive Plan

At January 31, 2019, 275,400 nonvested restricted stock awards were outstanding under the 2016 plan. No options were outstanding under the 2016 plan. At January 31, 2019, 815,698 shares were collectively available for issuance pursuant to restricted stock and other stock awards, stock options and stock appreciation rights.

2006 Equity Incentive Plan

The 2006 Plan was terminated on January 7, 2016 in conjunction with the adoption of the 2016 Plan. At January 31, 2019, options to purchase 40,000 shares of common stock were outstanding under the 2006 Plan. No additional awards will be granted under this plan.

The following table shows the components of stock-based compensation expense recognized in the condensed consolidated statements of income:



	Three Months Ended January 31,				Six Months Ended January 31,
	2019		2018		2019		2018
Cost of sales	$	287	$	181	$	524	$	296
Operating expenses:
Selling	575		264		1,146		629
General and administrative	2,665		2,257		4,375		3,590
Research and development	60		37		118		75
Total operating expenses	3,300		2,558		5,639		4,294
Stock-based compensation expense	$	3,587	$	2,739	$	6,163	$	4,590

At January 31, 2019, total unrecognized stock-based compensation expense related to total nonvested stock options and restricted stock awards was $19,881 with a remaining weighted average period of 19 months over which such expense is expected to be recognized.

We determined the fair value of our market-based restricted stock awards using a Monte Carlo simulation on the date of grant using the following assumptions:



	Six Months Ended January 31,
	2019		2018
Volatility of common stock	27.54	%	26.60	%
Average volatility of peer companies	36.55	%	33.72	%
Average correlation coefficient of peer companies	27.18	%	32.26	%
Risk-free interest rate	2.93	%	1.62	%

A summary of nonvested stock award activity for the six months ended January 31, 2019 follows:



	Number of Time-based Awards		Number of Performance-based Awards		Number of Market-based Awards	Number of Total Awards		Weighted Average Fair Value
July 31, 2018	168,320		26,076		17,710	212,106		$	88.87
Granted	122,478		27,231		16,765	166,474		$	91.63
Vested⁽¹⁾	(85,308	)	(10,284	)	—	(95,592	)	$	76.71
Forfeited	(6,865	)	(723	)	—	(7,588	)	$	89.13
January 31, 2019	198,625		42,300		34,475	275,400		$	94.99

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(1)	The aggregate fair value of all nonvested stock awards which vested was approximately $7,335.

A summary of stock option activity for the six months ended January 31, 2019 follows:



	Number of shares		Weighted Average Exercise Price		Weighted Average Contractual Life Remaining (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2018	70,000		$	38.60
Exercised	(30,000	)	$	31.81
Outstanding at January 31, 2019	40,000		$	43.70	1.07	$	1,509
Exercisable at January 31, 2019	40,000		$	43.70	1.07	$	1,509

During the six months ended January 31, 2019, 5,000 options vested, with an aggregate fair value of approximately $277. During the six months ended January 31, 2019, 30,000 options were exercised, with an aggregate fair value of approximately $1,787. At January 31, 2019, all outstanding options were vested.

Excess tax benefits arise when the ultimate tax effect of the deduction for tax purposes is greater than the income tax benefit on stock-based compensation. For the six months ended January 31, 2019, income tax deductions of $3,059 were generated, of which $2,062 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $997 was recorded as a reduction in income tax expense. For the six months ended January 31, 2018, income tax deductions of $3,406 were generated, of which $1,394 were recorded as a reduction in income tax expense over the equity awards’ vesting period and the remaining excess tax benefit of $2,012 was recorded as a reduction in income tax expense.