Share-based Compensation (Tables)

3 Months Ended

Oct. 31, 2014

Share-Based Compensation Expense

The following table presents share-based compensation expense included in our consolidated statements of operations:

	For the Three Months Ended October 31
(in millions)	2014			2013
Cost of product sales	$	0.2		$	0.2
Cost of engineering sales		—			0.1
Research and product development		0.7			0.6
Selling and marketing		0.3			0.3
General and administrative		1.4			1.5
Total share-based compensation expense before tax		2.6			2.7
Income tax effect		(0.8	)		(0.9	)
Share-based compensation expense included in net income (loss)	$	1.8		$	1.8

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
	2014			2013
Expected option term in years (1)		5.31			5.37
Expected volatility (2)		29.3	%		38.6	%
Risk-free interest rate (3)		1.83	%		1.77	%
Expected annual dividend yield (4)		0.56	%		0.52	%

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

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

(3) The risk-free interest rate is determined based on the yield of the zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption.

(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 our TSR performance-based awards at the date of grant was estimated using the Monte-Carlo simulation model with the following assumptions:

	For the Three Months Ended
	October 31
	2014			2013
Stock Price (1)	$	71.09		$	77.08
Expected volatility (2)		29.4	%		27.6	%
Risk-free interest rate (3)		1.01	%		0.82	%
Expected annual dividend yield (4)		0.00	%		0.00	%

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

(2) The expected volatility for each grant is determined based on the historical volatility for the peer group companies and our common stock 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 is determined based on the yield of zero-coupon U.S. Treasury securities for a period that is commensurate with the expected term assumption.

(4) Dividends are considered reinvested when calculating TSR. The dividend yield is therefore considered to be 0%.