Stock-Based Compensation

The 2010 Master Stock Incentive Plan (the Plan) allows for the granting of nonqualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards. Options under the Plan are granted to key employees whereby the option exercise price is equivalent to the market price of the Company's common stock at the date of grant. Options are generally exercisable for up to 10 years from the date of grant and vest in equal increments over three years. For the years ended July 31, 2018, 2017 and 2016, the Company recorded pretax stock-based compensation expense associated with stock options of $8.1 million, $7.5 million and $6.7 million, respectively. The Company also recorded tax benefits associated with this compensation expense of $1.9 million, $2.2 million and $2.1 million for the years ended July 31, 2018, 2017 and 2016, respectively.

The Plan also allows for the granting of performance-based awards to a limited number of key executives. As administered by the Human Resources Committee of the Company’s Board of Directors, these performance-based awards are payable in common stock and are based on a formula that measures performance of the Company over a three-year period. Performance-based award expense under these plans totaled $7.5 million, $0.9 million and $0.3 million in the years ended July 31, 2018, 2017 and 2016, respectively.

Stock-based employee compensation expense is recognized using the fair-value method for all awards. The Company determined the fair value of these awards using the Black-Scholes option pricing model with the following assumptions:



	Year Ended July 31,
	2018		2017		2016
Risk-free interest rate	2.0 - 2.9%		2.5 - 2.6%		1.6 - 2.3%
Expected volatility	18.2 - 20.6%		20.8 - 24.1%		21.8 - 25.9%
Expected dividend yield	1.6	%	1.7	%	1.7	%

Expected life:
Director and officer grants	8 years		8 years		8 years
Non-officer original grants	7 years		7 years		7 years

The weighted average fair value for options granted during the years ended July 31, 2018, 2017 and 2016 was $9.29, $10.09 and $7.10 per share, respectively, using the Black-Scholes pricing model.

The following table summarizes stock option activity for the years ended July 31, 2018, 2017 and 2016:



	Options Outstanding		Weighted Average Exercise Price
Outstanding at July 31, 2015	7,191,442		$	29.38
Granted	969,450		28.19
Exercised	(916,789	)	19.39
Canceled	(421,713	)	36.95
Outstanding at July 31, 2016	6,822,390		30.09
Granted	888,500		42.65
Exercised	(978,193	)	24.04
Canceled	(47,146	)	36.51
Outstanding at July 31, 2017	6,685,551		32.60
Granted	881,050		45.70
Exercised	(738,635	)	26.47
Canceled	(42,154	)	39.52
Outstanding at July 31, 2018	6,785,812		34.93

The total intrinsic value of options exercised during the years ended July 31, 2018, 2017 and 2016 was $16.0 million, $18.3 million and $11.6 million, respectively.

The number of shares reserved at July 31, 2018 for outstanding options and future grants was 8,899,574. Shares reserved consist of shares available for grant plus all outstanding options.

The following table summarizes information concerning outstanding and exercisable options as of July 31, 2018:



Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (Years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.00 to $27.69	892,599	1.1	$	19.83	892,599	$	19.83
$27.70 to $32.69	1,464,785	5.3	28.58		1,164,643	28.68
$32.70 to $37.69	1,345,832	4.0	34.43		1,344,999	34.43
$37.70 to $42.69	1,363,651	6.2	40.36		1,276,451	40.23
$40.70 and above	1,718,945	8.6	44.25		365,804	42.84
	6,785,812	5.5	34.93		5,044,496	32.60

At July 31, 2018, the aggregate intrinsic value of shares outstanding and exercisable was $86.8 million and $76.2 million, respectively.

The following table summarizes the status of options that contain vesting provisions:



	Options		Weighted Average Grant Date Fair Value
Non-vested at July 31, 2017	1,780,525		$	9.06
Granted	881,050		9.29
Vested	(880,939	)	9.05
Canceled	(39,320	)	8.41
Non-vested at July 31, 2018	1,741,316		9.20

The total fair value of options vested during years ended July 31, 2018, 2017 and 2016, was $42.0 million, $39.6 million and $30.0 million, respectively.

As of July 31, 2018, there was $7.2 million of total unrecognized compensation expense related to non-vested stock options granted under the Plan. This unvested expense is expected to be recognized during fiscal years 2019, 2020 and 2021.