Share-Based Compensation (Tables)

3 Months Ended

Oct. 31, 2012

Share-based Compensation Expenses

The following table presents share-based compensation expense included in our unaudited condensed Consolidated Statements of Operations:

	Three months Ended October 31,
	2012			2011
Cost of product sales		$	164		$	132
Cost of engineering sales			400			-
Research and product development			308			619
Selling and marketing			340			253
General and administrative			1,432			1,247
Total share-based compensation expense before tax		$	2,644		$	2,251

Compensation Expense Recognized on Awards

We recognize compensation expense on performance-based restricted stock grants with earnings per share, or “EPS,”-related and total shareholder return, or “TSR,”-related conditions along with time-based stock options and restricted stock award conditions as follows:

	For the Three Months Ended October 31,
	2012			2011
Peformance based EPS-related condition		$	1,056		$	958
Performance based TSR-related condition			714			775
Total performance-based expense			1,770			1,733
Time based stock options and restricted stock awards			874			518
Total share-based compensation expense before tax		$	2,644		$	2,251

Fair Value of Option Grant Assumptions

The fair value of each option grant was estimated on the grant date using the Black-Scholes valuation model with the following assumptions for the three months ended October 31, 2012 and 2011 as follows:

	Three Months Ended October 31,
	2012			2011
Expected option term (1)		5.42 years			5.34 years
Expected volatility factor (2)		41	%		38	%
Risk-free interest rate (3)		0.78	%		0.95	%
Expected annual dividend yield (4)		0.57	%		0.87	%

(1) The option life term factor was estimated using historical data.

(2) The expected volatility factor for each grant is determined based on the review of the weighted average of historical daily price changes of our common stock over the most recent expected option term.

(3) The risk free interest rate for periods equal to the expected term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant.

(4) The expected annual dividend yield is calculated by dividing the expected annual dividends by the stock price on the date of grant.

Fair Value of Awards Grant Assumptions

The fair value of the restricted stock units with a TSR-related condition at date of grant was estimated using a Monte-Carlo Simulation model with the following assumptions:

	Three Months Ended October 31,          2012
Stock Price (1)		$70.04
Expected volatility factor (2)		28%
Risk-free interest rate (3)		0.32%
Expected annual dividend yield (4)		0.0%

(1) The stock price is the weighted average closing price of our common stock on the date of grant.

(2) The expected volatility factor for each grant is determined based on the historical volatility for the peer group companies over a period equal to the remaining term of the performance period from the date of grant for all awards.

(3) The risk free interest rate for periods equal to the performance period is based on the U.S. Treasury yield curve in effect at the time of grant.

(4) Dividends are considered reinvested when calculating TSR. For the purpose of the fair value model, the dividend yield is therefore considered to be 0%.