STOCK-BASED COMPENSATION

Our operating income for the three months ended March 31, 2017 and 2016 included $3,132 and $3,101 of stock-based compensation costs, respectively. For the nine months ended March 31, 2017 and 2016, stock-based compensation totaled $7,362 and $8,213, respectively.

Stock Options

On November 10, 2015, the Company adopted the 2015 Equity Incentive Plan ("2015 EIP") for its employees and non-employee directors. The plan allows for grants of stock options, stock appreciation rights, restricted stock shares or units, and performance shares or units. The maximum number of shares authorized for issuance under the plan is 3,000. For stock options, terms and vesting periods of the options are determined by the Compensation Committee of the Board of Directors when granted. The option period must expire not more than ten years from the option grant date. The options granted under this plan are exercisable beginning three years after the grant date at an exercise price equal to 100% of the fair market value of the stock at the grant date. The options terminate upon surrender of the option, upon the expiration of one year following notification of a deceased optionee, or ten years after grant.

The Company previously issued options to outside directors under the 2005 Non-Qualified Stock Option Plan (“2005 NSOP”). No additional stock options may be issued under this plan.

A summary of option plan activity under these plans is as follows:



	Number of Shares	Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding July 1, 2016	50	22.14
Granted	32	87.27
Forfeited	—	—
Exercised	—	—
Outstanding March 31, 2017	82	$	47.41	$	3,733
Vested and Expected to Vest March 31, 2017	82	$	47.41	$	3,733
Exercisable March 31, 2017	50	$	22.14	$	3,548

The Company utilized a Black-Scholes option pricing model to estimate fair value of the stock option grants at the grant date. All 32 options granted during the year were granted on July 1, 2016. Assumptions such as expected life, volatility, risk-free interest rate, and dividend yield impact the fair value estimate. These assumptions are subjective and generally require significant analysis and judgment to develop. The risk free interest rate used in our estimate was determined from external data, while volatility, expected life, and dividend yield assumptions were derived from our historical experience with share-based payment arrangements. The appropriate weight to place on historical experience is a matter of judgment, based on relevant facts and circumstances. The assumptions used in estimating fair value and resulting compensation expenses at the grant dates are as follows:



Expected Life (years)	6.50
Volatility	19.60	%
Risk free interest rate	1.24	%
Dividend yield	1.28	%

At March 31, 2017, there was $375 of compensation cost yet to be recognized related to outstanding options. The weighted average remaining contractual term on options currently exercisable as of March 31, 2017 was 2.25 years.

Restricted Stock Awards

The Company issues both share awards and unit awards under the 2015 EIP, and previously issued these through the 2005 Restricted Stock Plan. The following table summarizes non-vested share awards as of March 31, 2017, as well as activity for the nine months then ended:



Share awards	Shares		Weighted Average Grant Date Fair Value
Outstanding July 1, 2016	58		44.95
Granted	17		87.27
Vested	(37	)	36.31
Forfeited	(1	)	65.52
Outstanding March 31, 2017	37		$	73.37

At March 31, 2017, there was $1,379 of compensation expense that has yet to be recognized related to non-vested restricted stock share awards, which will be recognized over a weighted-average period of 1.18 years.

The following table summarizes non-vested unit awards as of March 31, 2017, as well as activity for the nine months then ended:



Unit awards	Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding July 1, 2016	429		58.06
Granted	129		77.54
Vested	(136	)	50.12
Forfeited	(37	)	54.14
Outstanding March 31, 2017	385		$	67.74	$	35,478

The Company utilized a Monte Carlo pricing model customized to the specific provisions of the Company’s plan design to value unit awards subject to performance targets on the grant dates. The weighted average assumptions used in this model to estimate fair value at the measurement date and resulting values for 85 unit awards granted in fiscal 2017 are as follows:



Volatility	16.00	%
Risk free interest rate	0.93	%
Dividend yield	1.30	%
Stock Beta	0.684

The remaining 44 unit awards granted are not subject to performance targets, and therefore the estimated fair value at measurement date is valued in the same manner as restricted stock share award grants.

At March 31, 2017, there was $12,548 of compensation expense that has yet to be recognized related to non-vested restricted stock unit awards, which will be recognized over a weighted-average period of 1.29 years.