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 and unrestricted shares of Class A Nonvoting Common Stock to employees and non-employee directors.

The options issued under the plan have an exercise price equal to the fair market value of the underlying stock at the date of grant and generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. Options issued under the plan, referred to herein as “service-based” stock options, generally expire 10 years from the date of grant.

Restricted shares and RSUs 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 under the plan generally vest over a three-year service period, with one-third becoming exercisable one year after the grant date and one-third additional in each of the succeeding two years. The Company also grants restricted shares and RSUs to certain executives and key management employees that vest upon meeting certain financial performance conditions.

As of January 31, 2015, the Company has reserved 4,023,697 shares of Class A Nonvoting Common Stock for outstanding stock options, RSUs, and restricted and unrestricted shares and 3,398,921 shares of Class A Nonvoting Common Stock remain for future issuance of stock options, RSUs, and restricted and unrestricted 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 at the time it is deemed probable the award will vest. This cost is recognized on a straight-line basis over the vesting period of the award. If it is determined that it is unlikely the award will vest, the expense recognized to date for the award is reversed in the period in which this is evident and the remaining expense is not recorded. Total stock-based compensation expense recognized by the Company during the three months ended January 31, 2015 and 2014, was $1,152 ($714 net of taxes) and $1,777 ($1,102 net of taxes), respectively. Expense recognized during the six months ended January 31, 2015 and 2014, was $2,471 ($1,532 net of taxes) and $4,377 ($2,714 net of taxes), respectively.

As of January 31, 2015, total unrecognized compensation cost related to stock-based compensation awards was $10,511 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.6 years.

The Company has estimated the fair value of its service-based option awards granted during the six months ended January 31, 2015 and 2014, 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	2015			2014
Expected term (in years)	6.05			5.97
Expected volatility	34.03		%	37.32		%
Expected dividend yield	2.48		%	2.35		%
Risk-free interest rate	1.91		%	1.80		%
Weighted-average market value of underlying stock at grant date	$	22.70		$	30.98
Weighted-average exercise price	$	22.70		$	30.98
Weighted-average fair value of options granted during the period	$	6.11		$	9.17

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, 2015 is presented below:



Options	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at July 31, 2014	4,204,260	$	30.82
New grants	618,733	22.70
Exercised	(36,333)	22.82
Forfeited or expired	(1,048,929)	31.04
Outstanding at January 31, 2015	3,737,731	$	29.49	5.8	$	3,108,904
Exercisable at January 31, 2015	3,131,418	$	30.97	4.7	$	1,005,722

There were 3,131,418 and 3,274,218 options exercisable with a weighted average exercise price of $30.97 and $31.14 at January 31, 2015 and 2014, respectively. The cash received from the exercise of options during the three months ended January 31, 2015 and 2014 was $756 and $5,685, respectively. The cash received from the exercise of options during the six months ended January 31, 2015 and 2014 was $847 and $10,894, respectively. The tax benefit on options exercised during the three months ended January 31, 2015 and 2014 was $41 and $316, respectively. The tax benefit on options exercised during the six months ended January 31, 2015 and 2014 was $44 and $788, respectively.

The total intrinsic value of options exercised during the six months ended January 31, 2015 and 2014, based upon the average market price at the time of exercise during the period, was $115 and $2,020, respectively. The total fair value of stock options vested during the six months ended January 31, 2015 and 2014, was $3,841 and $6,338, 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, 2015:



Service-Based RSUs and Restricted Shares	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2014	104,857		$	31.02
New grants	239,997		23.57
Vested	(34,247	)	30.79
Forfeited	(24,641	)	30.35
Outstanding at January 31, 2015	285,966		$	24.85

Performance-Based RSUs and Restricted Shares	Shares		Weighted Average Grant Date Fair Value
Outstanding at July 31, 2014	80,000		$	32.50
New grants	—		—
Vested	—		—
Forfeited	(80,000	)	32.50
Outstanding at January 31, 2015	—		$	—