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 RSUs, stock options, and various performance shares. The following table summarizes our total compensation expense and related income tax benefit in connection with our share-based compensation plans for 2014, 2013, and 2012.



	Years Ended October 31,
(in millions)	2014			2013			2012
Share-based compensation expense before income taxes	$	16.3		$	13.3		$	10.2
Income tax benefit	(6.8		)	(5.5		)	(4.2		)
	$	9.5		$	7.8		$	6.0

The total shares issued upon the exercise of options under all share-based compensation plans were 974,399 shares, 1,031,867 shares, and 967,123 shares for 2014, 2013, and 2012, respectively. The total intrinsic value of options exercised was $3.8 million, $4.1 million, and $2.7 million for 2014, 2013, and 2012, respectively. The total fair value of shares that vested during 2014, 2013, and 2012 was $9.0 million, $7.6 million, and $5.9 million, respectively. The weighted average grant date fair value of shares granted during 2014, 2013, and 2012 was $27.7, $19.7, and $16.8, respectively.

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, 2014, 1,230,628 shares of common stock were available for grant for future equity-based compensation awards under the plan.

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 IRC.

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.

In 2014, we began issuing TSR-based performance share awards. These TSR awards will be earned on the basis of our total shareholder return measured against the total shareholder return of companies in the Standard & Poor’s Small Cap 600 Index (“S&P 600”) over a three-year period.

2006 Equity Plan

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 or service as a director, as the case may be. 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 2014 is summarized below:



	Number of Shares (in millions)		Weighted-Average Grant Date Fair Value per Share
Nonvested at November 1, 2013	1.4		$	21.7
Granted	0.3		27.8
Vested (including 0.1 shares withheld for income taxes)	(0.2	)	19.8
Forfeited	(0.1	)	22.2
Nonvested at October 31, 2014	1.4		$	23.4
Vested at October 31, 2014	0.2		$	20.1

Total unrecognized compensation cost (net of estimated forfeitures) related to nonvested RSUs at October 31, 2014 was $18.5 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 2.8 years. The aggregate intrinsic value of the nonvested and vested RSUs as of October 31, 2014 was $38.0 million and $4.5 million, respectively.

Stock Options

Typically, stock options 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 typically 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 it is changed.

Stock option activity during 2014 is summarized below:



	Number of Shares (in millions)		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at November 1, 2013	1.6		$	21.6
Exercised	(0.4	)	20.9
Outstanding at October 31, 2014	1.2		$	21.8	3.8	$	7.2
Exercisable at October 31, 2014	0.5		$	20.2	3.7	$	3.5

Total unrecognized share-based compensation cost (net of estimated forfeitures) related to nonvested stock option awards at October 31, 2014 was $2.5 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 2.0 years.

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. 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.

For certain performance share awards, the number of performance shares that will vest is based on pre-established internal 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 internal targets are achieved. For TSR awards, the number of performance shares that will vest is based on our total shareholder return relative to the S&P 600 over the respective three-year performance period. Vesting of 0% to 150% of the awards originally granted may occur depending on our relative total shareholder return performance over the performance period.

Performance share activity, including TSR performance shares awarded during 2014, is summarized below:



	Number of Shares (in millions)		Weighted-Average Grant Date Fair Value per Share
Nonvested at November 1, 2013	0.9		$	22.3
Granted	0.4		27.7
Vested (including 0.1 shares withheld for income taxes)	(0.2	)	25.0
Nonvested at October 31, 2014	1.1		$	23.9

Total unrecognized compensation cost (net of estimated forfeitures) related to all nonvested performance shares at October 31, 2014 was $10.1 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 1.9 years. Except for TSR performance shares, these costs are based on estimated achievement of performance targets and estimated costs will be reevaluated periodically. For our TSR performance shares, these costs are based on the fair value of awards at the grant date and are recognized on a straight-line basis over the service period of 3 years.

The aggregate intrinsic value of the nonvested and vested performance shares as of October 31, 2014 was $29.5 million and $0.2 million, respectively.

Method of Accounting and Our Assumptions

In prior years, we used the Black-Scholes options-pricing model to estimate the grant date fair value of stock option grants. In 2014, we used the Monte Carlo simulation valuation technique to estimate the fair value of the TSR performance share grants. The assumptions used in the Monte Carlo simulation model for 2014 and the Black-Scholes options-pricing model for 2013 and 2012 are shown in the table below.



	Monte Carlo			Black-Scholes			Black-Scholes
	2014			2013			2012
Expected life⁽¹⁾	2.15 years			5.37 years			5.6 years
Expected stock price volatility⁽²⁾	19.0		%	38.8		%	41.6		%
Expected dividend yield⁽³⁾	2.4		%	2.4		%	3.0		%
Risk-free interest rate⁽⁴⁾	0.6		%	1.8		%	0.8		%
Stock price⁽⁵⁾	$	26.6		N/A*			N/A*
Weighted average fair value of option grants	N/A			$	7.5		$	5.3



*	Not Applicable

(1) For TSR awards valued under the Monte Carlo simulation model, the expected life represents the remaining performance period of the awards. For stock options valued under the Black-Scholes options-pricing model, the expected life is based on observed historical exercise patterns of the previously granted options adjusted to reflect the change in vesting and expiration dates.

(2) For the Monte Carlo simulation model, the expected volatility for each grant is determined based on the historical volatility of our common stock over a period equal to the remaining term of the performance period from the date of grant for all awards. For the Black-Scholes options-pricing model, 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.

(3) The dividend yield is based on the historical dividend yield over the expected life of the awards granted.

(4) For the Monte Carlo simulation and Black-Scholes options-pricing models, the risk-free interest rate is based on the continuous compounded yield on U.S. Treasury Constant Maturity Rates. For TSR awards valued under the Monte Carlo simulation model, the remaining term is determined over a period of time that is commensurate with the performance period from the grant date. For stock option awards valued under the Black-Scholes options-pricing models, the remaining term is equal to the expected term of the option.

(5) The stock price is the closing price of our common stock on the valuation date.

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 2014 is summarized below:



	Number of Shares (in millions)		Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding at November 1, 2013	0.8		$	17.3
Exercised	(0.2	)	18.9
Outstanding at October 31, 2014	0.6		$	16.8	17.8	$	6.2
Exercisable at October 31, 2014	0.4		$	18.2	9.2	$	3.6

Total unrecognized compensation cost (net of estimated forfeitures) related to nonvested stock options under the Age-Vested Plan at October 31, 2014 was $0.3 million. The cost is expected to be expensed ratably over a weighted-average vesting period of 7.6 years. As of October 31, 2014, 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 under the 2004 Employee Stock Purchase Plan, as amended were $1.4 during 2014 and $1.1 during both of the years 2013 and 2012. During 2014, 2013, and 2012, 165,062 shares, 186,271 shares, and 200,108 shares of stock were issued under the plan at a price of $25.8, $21.3, and $19.9, respectively. The aggregate purchases were $4.3 million during 2014 and $4.0 million during both 2013 and 2012. At October 31, 2014, 402,881 shares remained unissued under the plan.