STOCK-BASED COMPENSATION

Our pre-tax operating income for the years ended June 30, 2017, 2016, and 2015 includes $11,129, $10,720, and $10,112 of equity-based compensation costs, respectively, of which $9,861, $9,712, and $9,251 relates to the restricted stock plans, respectively. The income tax benefits from stock option exercises and restricted stock vests totaled $2,638, $1,051, and $4,343 for the years ended June 30, 2017, 2016, and 2015, respectively.

2015 Equity Incentive Plan and 2005 Non-Qualified Stock Option Plan

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 were determined by the Compensation Committee of the Board of Directors when granted. The option period must expire not more than ten years from the options grant date. The options granted under this plan are exercisable beginning three years after grant 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, ninety days after termination of employment, upon the expiration of one year following notification of a deceased optionee, or 10 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.

The 2005 NSOP was adopted by the Company on September 23, 2005, for its outside directors. Generally, options were exercisable beginning 6 months after grant at an exercise price equal to the fair market value of the stock at the grant date. For individuals who have served less than four continuous years, 25% of all options will vest after one year of service, 50% shall vest after two years, and 75% shall vest after three years of service on the Board. The options terminate upon surrender of the option, upon the expiration of one year following notification of a deceased optionee, or 10 years after grant. 700 shares of common stock were reserved for issuance under this plan with a maximum of 100 for each director.

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



	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding July 1, 2014	125		$	22.29
Granted	—		—
Forfeited	—		—
Exercised	(25	)	19.17
Outstanding July 1, 2015	100		23.07
Granted	—		—
Forfeited	—		—
Exercised	(50	)	23.99
Outstanding July 1, 2016	50		22.14
Granted	32		87.27
Forfeited	—		—
Exercised	(10	)	28.52
Outstanding June 30, 2017	72		$	50.04	$	3,859
Vested and Expected to Vest June 30, 2017	72		$	50.04	$	3,859
Exercisable June 30, 2017	40		$	20.55	$	3,333

There were 32 options granted in fiscal 2017, and no options granted during either of the two prior years presented. The weighted-average fair value at the grant date of options granted during fiscal 2017 was $15.78.

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 fiscal 2017 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 June 30, 2017, there was $334 of compensation cost yet to be recognized related to outstanding options. The weighted average remaining contractual term on options currently exercisable as of June 30, 2017 was 1.88 years.

The total intrinsic value of options exercised was $747, $3,011, and $1,044 for the fiscal years ended June 30, 2017, 2016, and 2015, respectively.

Restricted Stock Plan and 2015 Equity Incentive Plan

The Restricted Stock Plan was adopted by the Company on November 1, 2005, for its employees. The plan expired on November 1, 2015. Up to 3,000 shares of common stock were available for issuance under the plan. The 2015 EIP was adopted by the company on November 10, 2015 for its employees. Up to 3,000 shares of common stock are available for issuance under the 2015 Equity Incentive Plan. Upon issuance, shares of restricted stock are subject to forfeiture and to restrictions which limit the sale or transfer of the shares during the restriction period. The restrictions will be lifted over periods ranging from 3 years to 5 years from grant date.

The following table summarizes non-vested share awards activity:



Share awards	Shares		Weighted Average Grant Date Fair Value
Outstanding July 1, 2014	138		33.56
Granted	12		57.77
Vested	(71	)	35.69
Forfeited	(7	)	46.39
Outstanding July 1, 2015	72		34.28
Granted	22		66.31
Vested	(24	)	43.45
Forfeited	(12	)	23.82
Outstanding July 1, 2016	58		44.95
Granted	17		87.27
Vested	(38	)	37.00
Forfeited	(1	)	65.52
Outstanding June 30, 2017	36		$	73.66

The non-vested share awards granted prior to July 1, 2016 do not participate in dividends during the restriction period. As a result, the weighted-average fair value of the non-vested share awards was based on the fair market value of the Company’s equity shares on the grant date, less the present value of the expected future dividends to be declared during the restriction period, consistent with the methodology for calculating compensation expense on such awards. The 17 non-vested share awards granted during the year ending June 30, 2017 do participate in dividends during the restriction period. The weighted-average fair value of such participating awards was based on the fair market value on the grant date.

At June 30, 2017, there was $1,094 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 0.96 years.

An amendment to the Restricted Stock Plan was adopted by the Company on August 20, 2010. Unit awards were made to employees remaining in continuous employment throughout the performance period and vary based on the Company’s percentile ranking in Total Shareholder Return (“TSR”) over the performance period compared to a peer group of companies. TSR is defined as the change in the stock price through the performance period plus dividends per share paid during the performance period, all divided by the stock price at the beginning of the performance period. It is the intention of the Company to settle the unit awards in shares of the Company’s stock. Certain Restricted Stock Unit awards are not tied to performance goals, and for such awards, vesting occurs over a period of 1 to 3 years.

The following table summarizes non-vested unit awards as of June 30, 2017, as well as activity for the year then ended:



Unit awards	Shares		Weighted Average Grant Date Fair Value	Aggregate Intrinsic Value
Outstanding July 1, 2014	709		31.66
Granted	178		53.62
Vested	(277	)	19.69
Forfeited	(111	)	22.74
Outstanding July 1, 2015	499		48.13
Granted	130		75.99
Vested	(99	)	44.09
Forfeited	(101	)	45.89
Outstanding July 1, 2016	429		58.06
Granted	130		77.75
Vested	(136	)	50.12
Forfeited	(37	)	54.30
Outstanding June 30, 2017	386		$67.84	$40,043

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 grant dates are as follows:



	Year Ended June 30,
	2017		2016		2015
Volatility	16.0	%	15.6	%	17.8	%
Risk free interest rate	0.93	%	1.06	%	1.06	%
Dividend yield	1.3	%	1.5	%	1.5	%
Stock Beta	0.684		0.741		0.765

For the year ended June 30, 2017, 85 unit awards were granted and measured using the above assumptions. The remaining 45 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 award grants.

At June 30, 2017, there was $9,887 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 1.04 years.

The fair value of restricted shares and units at vest date totaled $15,085, $8,677, and $20,275 for the years ended June 30, 2017, 2016, and 2015, respectively.