14. SHARE-BASED COMPENSATION PLANS

We use various share-based compensation plans to provide incentives for our key employees and directors. Currently, these incentives primarily consist of nonqualified stock options, RSUs, and performance shares. The following table summarizes our total compensation expense and related income tax benefit in connection with our share-based compensation plans for the years ended October 31, 2013, 2012, and 2011. Share-based compensation expense is recorded in selling, general and administrative expenses.


	Years Ended October 31,
(in thousands)	2013		2012		2011
Share-based compensation expense before income taxes	$	13,282	$	10,236	$	9,191
Income tax benefit		(5,512)		(4,247)		(3,805)

	$	7,770	$	5,989	$	5,386

The total shares issued upon the exercise of options under all share-based compensation plans were 1,031,867 shares, 967,123 shares, and 570,425 shares during the years ended October 31, 2013, 2012 and 2011, respectively. The total intrinsic value of the shares exercised was $12.9 million, $9.8 million, and $6.7 million for the years ended October 31, 2013, 2012, and 2011, respectively. The total fair value of shares that vested during the years ended October 31, 2013, 2012, and 2011 was $8.7 million, $8.2 million, and $2.4 million, respectively.

Method of Accounting and Our Assumptions

Compensation expense for stock options is determined based on the grant date fair value of the award calculated using the Black-Scholes options-pricing model. The assumptions used in the option valuation model for the years ended October 31, 2013, 2012, and 2011 are shown in the table below:


2013			2012		2011
Expected life from the date of grant		5.37 years		5.6 years		5.6 years
Expected stock price volatility		38.8%		41.6%		39.2% – 40.4%
Expected dividend yield		2.4%		3.0%		2.3% – 2.6%
Risk-free interest rate		1.8%		0.8%		1.0% – 2.1%
Weighted average fair value of option grants	$	7.52	$	5.25	$	6.52

The expected life for granted stock options is based on observed historical exercise patterns of the previously granted options adjusted to reflect the change in vesting and expiration dates. The expected volatility is based on considerations of implied volatility from publicly traded and quoted options on our common stock and the historical volatility of our common stock. The dividend yield is based on the historical dividend yield over the expected term of the options granted. The risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates with a remaining term equal to the expected term of the option.

Share-Based Compensation Plans

On May 2, 2006, our stockholders approved the 2006 Equity Incentive Plan (the “2006 Equity Plan”). The 2006 Equity Plan was amended in March 2009 and March 2012 to increase the total shares of common stock authorized for issuance to 10,279,265. At October 31, 2013, 1,745,854 shares of common stock were available for grant for future equity-based compensation awards under the plan.

Prior to the adoption of the 2006 Equity Plan, equity awards were made under the Executive Stock Option Plan (the “Age-Vested Plan”), the Time-Vested Incentive Stock Option Plan (the “Time-Vested Plan”), and the 2002 Price-Vested Performance Stock Option Plan (the “Price-Vested Plan”). These plans are collectively referred to as the “Prior Plans.” No further grants can be made under the Prior Plans.

The terms and conditions governing existing options under the Prior Plans will continue to apply to the options outstanding under those plans. The 2006 Equity Plan is an omnibus plan that provides for a variety of equity and equity-based award vehicles, including stock options, stock appreciation rights, RSUs, performance shares, and other share-based awards. Shares subject to awards that terminate without vesting or exercise are available for future awards under the 2006 Equity Plan. Certain of the awards under the 2006 Equity Plan may qualify as “performance-based” compensation under the Internal Revenue Code.

2006 Equity Plan

Stock Options

Nonqualified stock options generally vest and become exercisable at a rate of 25% per year beginning one year after date of grant. However, terms of stock options can vary, and certain stock options granted on March 31, 2010 and January 10, 2011 will vest on the fifth anniversary of the award. Options expire seven years after the date of grant. Forfeitures are estimated on the date of grant based on historical forfeiture rates. The adjustment of the forfeiture rate may result in a cumulative adjustment in any period in which the forfeiture rate estimate is changed.

Stock option activity during the year ended October 31, 2013 is summarized below:


	Number of Shares (in thousands)		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at November 1, 2012		1,693	$	20.68
Granted		234		25.30
Forfeited or expired		(14)		19.89
Exercised		(351)		19.80

Outstanding at October 31, 2013		1,562	$	21.57		4.30	$	9,277

Vested and exercisable at October 31, 2013		565	$	20.22		3.01	$	4,124

Total unrecognized share-based compensation cost (net of estimated forfeitures) related to unvested stock option awards at October 31, 2013 was $4.3 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 1.94 years.

RSUs and Dividend Equivalent Rights

We award RSUs to eligible employees and our directors (each, a “Grantee”) that entitle the Grantee to receive shares of our common stock as the units vest based on service. In general, the receipt of RSUs is subject to the Grantee’s continuing employment. RSUs granted to eligible employees generally vest with respect to 50% of the underlying award on the second and fourth anniversary of the award. RSUs granted to directors vest over three years. Compensation expense is recognized ratably over the Grantee’s service period.

RSUs are credited with dividend equivalent rights that are converted to RSUs at the fair market value of our common stock on the dates the dividend payments are made and are subject to the same terms and conditions as the underlying award.

RSU activity during the year ended October 31, 2013 is summarized below:


	Number of Shares (in thousands)		Weighted-Average Grant Date Fair Value per Share
Outstanding at November 1, 2012		1,231	$	19.74
Granted		478		24.91
Issued (including 90 shares withheld for income taxes)		(267)		19.14
Forfeited or expired		(73)		19.28

Outstanding at October 31, 2013		1,369	$	21.66

Vested at October 31, 2013		267	$	19.14

Total unrecognized compensation cost (net of estimated forfeitures) related to RSUs at October 31, 2013 was $18.7 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 2.38 years. The aggregate intrinsic value of the outstanding and vested RSUs as of October 31, 2013 was $37.6 million and $6.5 million, respectively.

Performance Shares and Dividend Equivalent Rights

Performance shares consist of a contingent right to receive shares of our common stock based on performance targets adopted by our Compensation Committee. The number of performance shares that will vest is based on pre-established financial performance targets and typically a three-year service and performance period. Vesting of 0% to 150% of the indicated shares may occur depending on the extent to which targets are achieved.

Performance shares are credited with dividend equivalent rights that will be converted to performance shares at the fair market value of our common stock beginning after the performance targets have been satisfied and are subject to the same terms and conditions as the underlying award.

Performance share activity during the year ended October 31, 2013 is summarized below:


	Number of Shares (in thousands)		Weighted-Average Grant Date Fair Value per Share
Outstanding at November 1, 2012		698	$	22.99
Granted		479		20.46
Issued (including 45 shares withheld for income taxes)		(115)		18.97
Change in units based on performance		(130)		22.60
Forfeited		(33)		22.87

Outstanding at October 31, 2013		899	$	22.31

Vested at October 31, 2013		115	$	18.97

Total unrecognized compensation cost (net of estimated forfeitures) related to performance shares at October 31, 2013 was $8.4 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 1.83 years. These costs are based on estimated achievement of performance targets and estimated costs will be reevaluated periodically. The aggregate intrinsic value of the outstanding and vested performance shares as of October 31, 2013 was $24.7 million and $3.2 million, respectively.

Prior Plans

Age-Vested Plan

Under the Age-Vested Plan, options are exercisable for 50% of the shares when the stock option holders reach their 61^st birthdays and the remaining 50% become exercisable on their 64^th birthdays. To the extent vested, the stock options may be exercised at any time prior to one year after termination of employment. Effective as of December 9, 2003, no further grants may be made under the plan.

Time-Vested Plan

Under the Time-Vested Plan, the stock options become exercisable at a rate of 20% of the shares per year beginning one year after the date of grant and expire ten years plus one month after the date of grant. As of May 2, 2006, no further grants are authorized under this plan.

Price-Vested Plan

Under the Price-Vested Plan, pre-defined vesting prices provide for accelerated vesting. If at the end of four years any of the stock price performance targets are not achieved, then the remaining stock options vest at the end of eight years from the date the stock options were granted. There have been no grants under this plan since the year ended October 31, 2005, therefore the remaining outstanding stock options vested on October 31, 2013, the eighth anniversary of the award. Stock options vesting during the first year following grant do not become exercisable until after the first anniversary of grant. The stock options expire ten years after the date of grant. As of May 2, 2006, no further grants are authorized.

The combined plan activity for the Prior Plans during the year ended October 31, 2013 is summarized below:


	Number of Shares (in thousands)		Weighted- Average Exercise Price per Share		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding at November 1, 2012		1,117	$	13.80 – $19.61
Exercised		(298)		15.04 – 18.30
Forfeited or expired		(34)		15.94 – 20.12

Outstanding at October 31, 2013		785	$	13.66 – $20.60		1.60 – 41.17	$	8,005

Vested and exercisable at October 31, 2013		564	$	11.94 – $20.60		1.60 – 45.44	$	5,104

Total unrecognized compensation cost (net of estimated forfeitures) related to unvested stock options under the Age-Vested Plan at October 31, 2013 was $0.4 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 9.06 years. As of October 31, 2013, all outstanding stock options under the Time-Vested and Price-Vested Plans are vested.

Employee Stock Purchase Plan

On March 9, 2004, our stockholders approved the 2004 Employee Stock Purchase Plan (the “2004 Employee Stock Purchase Plan”). The 2004 Employee Stock Purchase Plan was amended in March 2010 to increase the total shares of common stock authorized for issuance to 3,000,000. Effective May 1, 2006, the plan is no longer considered compensatory and the values of the awards are no longer treated as share-based compensation expense. Additionally, as of that date, the purchase price became 95% of the fair value of our common stock price on the last trading day of the month. Employees may designate up to 10% of their compensation for the purchase of stock, subject to a $25,000 annual limit. Employees are required to hold their shares for a minimum of six months from the date of purchase.

The weighted average fair values of the purchase rights granted during the years ended October 31, 2013, 2012, and 2011 under the new plan were $1.12, $1.05, and $1.16, respectively. During the years ended October 31, 2013, 2012, and 2011, 186,271 shares, 200,108 shares, and 165,455 shares of stock were issued under the plan at a weighted average price of $21.34, $19.93, and $22.02, respectively. The aggregate purchases during the years ended October 31, 2013, 2012, and 2011 were $4.0 million, $4.0 million, and $3.6 million, respectively. At October 31, 2013, 567,943 shares remained unissued under the plan.