Stock-Based Compensation

The Company has an incentive stock plan under which the Board of Directors may grant nonqualified stock options to purchase shares of Class A Nonvoting Common Stock, restricted stock unit awards ("RSUs"), or restricted shares of Class A Nonvoting Common Stock to employees and non-employee directors.

The stock options have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vest ratably over a three-year period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Stock options issued under the plan, referred to herein as “service-based” stock options, generally expire 10 years from the date of grant. The Company has also granted stock options to certain executives and key management employees that vest upon meeting certain financial performance conditions over the vesting schedule described above. These options are referred to herein as “performance-based” stock options. Performance-based stock options expire 10 years from the date of grant.

Restricted stock units issued under the plan have an issuance price equal to the fair market value of the underlying stock at the date of grant. The RSUs granted in fiscal 2014, referred to herein as "service-based restricted stock units," vest ratably over a three-year period, with one-third becoming deliverable one year after the grant date and one-third additional in each of the succeeding two years. The RSUs granted in fiscal 2013 vest upon meeting certain financial performance conditions over a specified vesting period, referred to herein as “performance-based restricted stock units.” The performance-based RSUs vest over a two-year period upon meeting both performance and service conditions. A restricted stock unit is equivalent to one share of Class A Nonvoting Common Stock upon vesting.

Restricted shares issued under the plan have an issuance price equal to the fair market value of the underlying stock at the date of grant. The restricted shares granted in fiscal 2008 were amended in fiscal 2011 to allow for vesting after either a five-year period or a seven-year period based upon both performance and service conditions. The restricted shares granted in fiscal 2011 vest ratably at the end of years 3, 4 and 5 upon meeting certain performance and service conditions. These shares are referred to herein as “performance-based restricted shares.” Restricted shares granted in fiscal 2013 vest at the end of a three-year period based upon service conditions. These shares are referred to herein as “cliff-vested restricted shares.”

As of October 31, 2013, the Company has reserved 5,042,860 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted shares. A total of 3,921,653 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted shares under the active plans. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares under these plans.

The Company recognizes the compensation cost of all share-based awards on a straight-line basis over the vesting period of the award. Total stock-based compensation expense recognized by the Company during the three months ended October 31, 2013 and 2012, was $2,600 ($1,586 net of taxes) and $4,399 ($2,683 net of taxes), respectively.

As of October 31, 2013, total unrecognized compensation cost related to stock-based compensation awards was $10,753 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.1 years.

The Company has estimated the fair value of its service-based option awards granted during the three months ended October 31, 2013 and 2012, using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:



	Three months ended October 31,
Black-Scholes Option Valuation Assumptions	2013			2012
Expected term (in years)	5.92			5.94
Expected volatility	37.41		%	38.73		%
Expected dividend yield	2.36		%	2.20		%
Risk-free interest rate	1.78		%	0.89		%
Weighted-average market value of underlying stock at grant date	$	31.07		$	30.21
Weighted-average exercise price	$	31.07		$	30.21
Weighted-average fair value of options granted during the period	$	9.18		$	8.96

The Company uses historical data regarding stock option exercise behaviors to estimate the expected term of options granted based on the period of time that options granted are expected to be outstanding. Expected volatilities are based on the historical volatility of the Company’s stock. The expected dividend yield is based on the Company’s historical dividend payments and historical yield. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the grant date for the length of time corresponding to the expected term of the option. The market value is calculated as the average of the high and the low stock price on the date of the grant.

The Company granted 347,145 service-based stock options during the three months ended October 31, 2013, with a weighted average exercise price of $31.07 and a weighted average fair value of $9.18.

A summary of stock option activity under the Company’s share-based compensation plans for the three months ended October 31, 2013 is presented below:



Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at July 31, 2013	5,106,585	$	30.68
New grants	347,145	31.07
Exercised	(213,548)	27.06
Forfeited or expired	(434,848)	32.79
Outstanding at October 31, 2013	4,805,334	$	30.68	6.1	$	4,518
Exercisable at October 31, 2013	3,466,777	$	30.93	5.1	$	4,079

There were 3,466,777 and 4,231,429 options exercisable with a weighted average exercise price of $30.93 and $29.78 at October 31, 2013 and 2012, respectively. The cash received from the exercise of options during the three months ended October 31, 2013 and 2012, was $5,209 and $1,684, respectively. The tax benefit on options exercised during the three months ended October 31, 2013 and 2012 was $472 and $635, respectively.

The total intrinsic value of options exercised during the three months ended October 31, 2013 and 2012, based upon the average market price at the time of exercise during the period, was $1,211 and $2,033, respectively. The total fair value of stock options vested during the three months ended October 31, 2013 and 2012, was $8,383 and $6,330, respectively.

The Company granted 95,765 service-based RSUs in September 2013, with a grant price and fair value of $31.07. The Company granted 5,000 shares of service-based restricted stock in October 2013, with a grant price and fair value of $29.70.

The following table summarizes RSUs and restricted stock activity under the Company's share-based compensation plans for the three months ended October 31, 2013:



RSUs	Units	Weighted Average Grant Date Fair Value
Outstanding at July 31, 2013	10,000	$	30.21
New grants	95,765	31.07
Vested	—	—
Forfeited	(407)	31.07
Outstanding at October 31, 2013	105,358	$	30.99

Restricted Stock	Shares	Weighted Average Grant Date Fair Value
Outstanding at July 31, 2013	226,667	$	31.52
New grants	5,000	29.70
Vested	—	—
Forfeited	—	—
Outstanding at October 31, 2013	231,667	$	31.48