Stock-Based Compensation

3 Months Ended

Jan. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-based compensation

During the 2018 Annual Meeting of Shareholders, our shareholders approved the Amended and Restated 2012 Stock Incentive and Award Plan (the “2012 Plan”). The 2012 Plan provides for the granting of stock options, stock appreciation rights, restricted shares, restricted share units, performance shares, cash awards and other stock or performance-based incentives. A maximum of 4,525 common shares were originally available for grant under the 2012 Plan.

Stock Options

Nonqualified or incentive stock options may be granted to our employees and directors. Generally, options granted to employees may be exercised beginning one year from the date of grant at a rate not exceeding 25 percent per year and expire 10 years from the date of grant. Vesting accelerates upon a qualified termination in connection with a change in control. In the event of termination of employment due to early retirement or normal retirement at age 65, options granted within 12 months prior to termination are forfeited, and vesting continues post retirement for all other unvested options granted.  In the event of disability or death, all unvested stock options granted within 12 months prior to termination (or at any time prior to December 28, 2017) fully vest. Termination for any other reason results in forfeiture of unvested options and vested options in certain circumstances.  The amortized cost of options is accelerated if the retirement eligibility date occurs before the normal vesting date.  Option exercises are satisfied through the issuance of treasury shares on a first-in, first-out basis. We recognized compensation expense related to stock options of $2,236 and $2,725 in the three months ended January 31, 2021 and 2020, respectively.

The following table summarizes activity related to stock options for the three months ended January 31, 2021:

	Number of Options	Weighted- Average Exercise Price  Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Term
Outstanding at October 31, 2020	1,487	$	122.45
Granted	92	201.50
Exercised	(64)	116.96
Forfeited or expired	(6)	146.89
Outstanding at January 31, 2021	1,509	$	127.40	$	80,152	7.0 years
Expected to vest	600	$	156.03	$	16,077	8.5 years
Exercisable at January 31, 2021	902	$	108.12	$	63,938	5.9 years

As of January 31, 2021, there was $14,122 of total unrecognized compensation cost related to unvested stock options. That cost is expected to be amortized over a weighted average period of approximately 1.8 years.

The fair value of each option grant was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Three Months Ended	January 31, 2021			January 31, 2020
Expected volatility	30.8%	-	32.6%	24.5%	-	25.4%
Expected dividend yield	0.83%			0.93%	-	1.16%
Risk-free interest rate	0.43%	-	0.54%	1.64%	-	1.69%
Expected life of the option (in years)	5.3	-	6.2	5.3	-	6.2

The weighted-average expected volatility used to value the 2021 and 2020 options was 31.0% and 25.1%, respectively.

Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued.

The weighted average grant date fair value of stock options granted during the three months ended January 31, 2021 and 2020 was $56.05 and $37.82, respectively.

The total intrinsic value of options exercised during the three months ended January 31, 2021 and 2020 was $5,435 and $17,244, respectively.

Cash received from the exercise of stock options for the three months ended January 31, 2021 and 2020 was $7,438 and $16,379, respectively.

Restricted Shares and Restricted Share Units

We may grant restricted shares and/or restricted share units to our employees and directors. These shares or units may not be transferred for a designated period of time (generally one to three years) defined at the date of grant. We may also grant continuation awards in the form of restricted share units with cliff vesting and a gateway performance measure that must be achieved for the restricted share units to vest.

For employee recipients, in the event of termination of employment due to early retirement with the consent of the Company, restricted shares and units granted within 12 months prior to termination are forfeited, and other restricted shares and units vest on a pro-rata basis, subject to the consent of the Compensation Committee. In the event of termination of employment due to normal retirement at age 65, restricted shares and units granted within 12 months prior to termination are forfeited, and, for other restricted shares and units, the restriction period applicable to restricted shares will lapse and the shares will vest and be transferable and all unvested units will become vested in full, subject to the consent of the Compensation Committee. In the event of a recipient's disability or death, all restricted shares and units granted within 12 months prior to termination (or at any time prior to December 28, 2017), fully vest. Termination for any other reason prior to the lapse of any restrictions or vesting of units results in forfeiture of the shares or units.

For non-employee directors, all restrictions lapse in the event of disability or death of the non-employee director. Termination of service as a director for any other reason within one year of date of grant results in a pro-rata vesting of shares or units.

As shares or units are issued, deferred stock-based compensation equivalent to the fair value on the date of grant is expensed over the vesting period.  

The following table summarizes activity related to restricted shares during the three months ended January 31, 2021:

	Number of Shares	Weighted-Average Grant Date Fair Value
Restricted shares at October 31, 2020	58	$	148.75
Granted	—	—
Forfeited	(1)	147.93
Vested	(15)	139.70
Restricted shares units at January 31, 2021	42	$	151.90

As of January 31, 2021, there was $3,263 of unrecognized compensation cost related to restricted shares. The cost is expected to be amortized over a weighted average period of 1.9 years. The amount charged to expense related to restricted shares during the three months ended January 31, 2021 and 2020 was $964 and $1,573, respectively. These amounts included common share dividends for the three months ended January 31, 2021 and 2020 of $18 and $25, respectively.        

The following table summarizes activity related to restricted share units during the three months ended January 31, 2021:

	Number of Units	Weighted-Average Grant Date Fair Value
Restricted shares units at October 31, 2020	—	$	—
Granted	85	202.14
Forfeited	(2)	198.68
Vested	(1)	201.50
Restricted shares units at January 31, 2021	82	$	202.26

As of January 31, 2021, there was $14,526 of remaining expense to be recognized related to outstanding restricted share units, which is expected to be recognized over a weighted average period of 1.5 years. The amount charged to expense related to restricted share units during each of the three months ended January 31, 2021 and 2020 was $2,092 and $286, respectively.

Performance Share Incentive Awards

Executive officers and selected other key employees are eligible to receive common share-based incentive awards. Payouts, in the form of unrestricted common shares, vary based on the degree to which corporate financial performance exceeds predetermined threshold, target and maximum performance goals over three-year performance periods. No payout will occur unless threshold performance is achieved.

The amount of compensation expense is based upon current performance projections for each three-year period and the percentage of the requisite service that has been rendered. The calculations are also based upon the grant date fair value determined using the closing market price of our common shares at the grant date, reduced by the implied value of dividends not to be paid. The per share values were $196.17 and $191.23 for 2021, $160.02, $133.01 and $184.04 for 2020. The amount charged to expense for the three months ended January 31, 2021 and 2020 was $4,755 and $1,421, respectively. The cumulative amount recorded in shareholders’ equity at January 31, 2021 was $4,592.

Deferred Compensation

Our executive officers and other highly compensated employees may elect to defer up to 100% of their base pay and cash incentive compensation, and for executive officers, up to 90% of their share-based performance incentive payout each year. Additional share units are credited for quarterly dividends paid on our common shares. Expense related to dividends paid under this plan for the three months ended January 31, 2021 and 2020 was $29 and $81, respectively.

Deferred Directors’ Compensation

Non-employee directors may defer all or part of their cash and equity-based compensation until retirement. Cash compensation may be deferred as cash or as share equivalent units. Deferred cash amounts are recorded as liabilities, and share equivalent units are recorded as equity. Additional share equivalent units are earned when common share dividends are declared.

The following table summarizes activity related to director deferred compensation share equivalent units during the three months ended January 31, 2021:

	Number of Shares	Weighted-Average Grant Date Fair Value
Outstanding at October 31, 2019	120	$	60.81
Dividend equivalents	—	—
Distributions	(7)	81.32
Outstanding at January 31, 2021	113	$	59.93

The amount charged to expense related to director deferred compensation for the three months ended January 31, 2021 and 2020 was $62 and $44, respectively.