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.

As of January 31, 2014, the Company has reserved 4,144,742 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted shares. A total of 3,932,311 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted shares under the active plan. The Company uses treasury stock or will issue new Class A Nonvoting Common Stock to deliver shares under the plan.

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 January 31, 2014 and 2013, was $1,777 ($1,102 net of taxes) and $2,521 ($1,538 net of taxes), respectively. Expense recognized during the six months ended January 31, 2014 and 2013, was $4,377 ($2,714 net of taxes) and $6,868 ($4,190 net of taxes), respectively.

As of January 31, 2014, total unrecognized compensation cost related to stock-based compensation awards was $9,403 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.0 years.

The Company has estimated the fair value of its service-based option awards granted during the six months ended January 31, 2014 and 2013, using the Black-Scholes option valuation model. The weighted-average assumptions used in the Black-Scholes valuation model are reflected in the following table:



	Six months ended January 31,
Black-Scholes Option Valuation Assumptions	2014			2013
Expected term (in years)	5.97			5.95
Expected volatility	37.32		%	38.68		%
Expected dividend yield	2.35		%	2.20		%
Risk-free interest rate	1.80		%	0.90		%
Weighted-average market value of underlying stock at grant date	$	30.98		$	30.36
Weighted-average exercise price	$	30.98		$	30.36
Weighted-average fair value of options granted during the period	$	9.17		$	9.01

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.

A summary of stock option activity under the Company’s share-based compensation plans for the six months ended January 31, 2014 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	375,272	30.98
Exercised	(407,507)	26.99
Forfeited or expired	(545,070)	32.30
Outstanding at January 31, 2014	4,529,280	$	30.84	5.8	$	2,059
Exercisable at January 31, 2014	3,274,218	$	31.14	4.7	$	1,957

There were 3,274,218 and 4,049,293 options exercisable with a weighted average exercise price of $31.14 and $30.19 at January 31, 2014 and 2013, respectively. The cash received from the exercise of options during the three months ended January 31, 2014 and 2013, was $5,685 and $2,725, respectively. The cash received from the exercise of options during the six months ended January 31, 2014 and 2013, was $10,894 and $4,409, respectively. The tax benefit on options exercised during the three months ended January 31, 2014 and 2013 was $316 and $630, respectively. The tax benefit on options exercised during the six months ended January 31, 2014 and 2013 was $788 and $1,265, respectively.

The total intrinsic value of options exercised during the six months ended January 31, 2014 and 2013, based upon the average market price at the time of exercise during the period, was $2,020 and $4,216, respectively. The total fair value of stock options vested during the six months ended January 31, 2014 and 2013, was $6,338 and $10,832, respectively.

The following table summarizes the RSU and restricted share activity under the Company's share-based compensation plans for the six months ended January 31, 2014:



Service-Based RSUs and Restricted Shares	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2013	5,000		$	32.99
New grants	108,055		30.93
Vested	—		—
Forfeited	(1,710)		31.07
Outstanding at January 31, 2014	111,345		$	31.02

Performance-Based RSUs and Restricted Shares	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2013	231,667		$	31.43
New grants	—		—
Vested	(35,001	)	28.35
Forfeited	(116,666	)	31.61
Outstanding at January 31, 2014	80,000		$	32.50