Stock-Based Compensation

3 Months Ended

Oct. 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE F — Stock-Based Compensation

The Company has incentive stock plans under which the Board of Directors may grant unrestricted stock, nonqualified stock options, incentive stock options, shares of restricted stock and restricted stock units to eligible employees and Directors of the Company and its affiliates. The stock options granted under the Company’s active incentive stock plans 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 these plans, referred to herein as “service-based” stock options, generally expire 10 years from the date of grant. The Company also grants 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. The Company granted restricted shares in fiscal 2008 and fiscal 2011 that 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 a seven-year period upon meeting both performance and service conditions. The restricted shares granted in fiscal 2011 vest ratably at the end of years three, four and five upon meeting certain performance and service conditions. The restricted shares granted in fiscal 2008 and 2011 are referred to herein as “performance-based restricted shares.”

As of October 31, 2011, the Company has reserved 6,885,999 shares of Class A Nonvoting Common Stock for outstanding stock options and restricted shares and 5,020,700 shares of Class A Nonvoting Common Stock remain for future issuance of stock options 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 compensation expense recognized by the Company during the three months ended October 31, 2011 and 2010 was $3,591 ($2,190 net of taxes) and $4,069 ($2,482 net of taxes), respectively. As of October 31, 2011, total unrecognized compensation cost related to share-based compensation awards was $22,882 pre-tax, net of estimated forfeitures, which the Company expects to recognize over a weighted-average period of 2.3 years.

The Company has estimated the fair value of its service-based and performance-based stock option awards granted during the three months ended October 31, 2011 and 2010 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						Three Months Ended
	October 31, 2011						October 31, 2010
				Performance-						Performance-
	Service-Based			Based Option			Service-Based			Based Option
Black-Scholes Option Valuation Assumptions	Option Awards			Awards			Option Awards			Awards
Expected term (in years)		5.89			6.57			5.92			6.57
Expected volatility		39.40	%		39.21	%		40.22	%		39.39	%
Expected dividend yield		2.07	%		1.99	%		1.94	%		1.96	%
Risk-free interest rate		1.16	%		2.05	%		1.65	%		2.35	%
Weighted-average market value of underlying stock at grant date	$	27.00		$	29.55		$	29.09		$	28.35
Weighted-average exercise price		27.00			29.55			29.09			28.35
Weighted-average fair value of options granted during the period		8.37			10.01			9.58			9.82

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 100,000 shares of performance-based restricted stock to Frank M. Jaehnert, the Company’s President and Chief Executive Officer, in August of 2010, with a grant price and fair value of $28.35. The Company also granted 210,000 shares of performance-based restricted stock during fiscal 2008, with a grant price and fair value of $32.83. As of October 31, 2011, 310,000 performance-based restricted shares were outstanding.

The Company granted 415,000 performance-based stock options during the three months ended October 31, 2011, with a weighted average exercise price of $29.55 and a weighted average fair value of $10.01. The Company also granted 791,150 service-based stock options during the three months ended October 31, 2011, with a weighted average exercise price of $27.00 and a weighted average fair value of $8.37.

A summary of stock option activity under the Company’s share-based compensation plans for the three months ended October 31, 2011 is presented below:

						Weighted
						Average
				Weighted		Remaining		Aggregate
				Average		Contractual		Intrinsic
Options	Shares			Exercise Price		Term		Value
Outstanding at July 31, 2011		5,726,017		$	29.24
New grants		1,206,150		$	27.88
Exercised		(69,803	)	$	20.49
Forfeited or expired		(49,365	)	$	28.58
Outstanding at October 31, 2011		6,812,999		$	29.09		6.8	$	22,979
Exercisable at October 31, 2011		3,975,963		$	29.83		5.3	$	14,652

There were 3,975,963 and 3,301,195 options exercisable with a weighted average exercise price of $29.83 and $29.10 at October 31, 2011 and 2010, respectively. The cash received from the exercise of options during the quarters ended October 31, 2011 and 2010 was $683 and $2,105, respectively. The tax benefit on stock options exercised during the quarters ended October 31, 2011 and 2010 was $469 and $440, respectively.

The total intrinsic value of options exercised during the three months ended October 31, 2011 and 2010, based upon the average market price at the time of exercise during the period, was $642 and $1,320, respectively. The total fair value of stock options vested during the three months ended October 31, 2011 and 2010, was $6,935 and $3,685, respectively.