EMPLOYEE BENEFIT PLANS

Deferred Compensation Plans

The Company has a 401(k) plan for all employees who have been with the Company for a period of six months or more. The Company matches portions of employees’ voluntary contributions. Additional employer contributions in the form of profit sharing may also be made at the Company’s discretion. The Company recorded $18.4 million, $16.0 million and $13.3 million of expense for matching contributions in fiscal 2018, 2017 and 2016, respectively.

The Company’s Supplemental Executive Retirement Plan (SERP) is a non-qualified deferred compensation program that provides benefits payable to certain management employees upon retirement, death or termination of employment. Under the SERP, the Company accrues an unfunded benefit based on a percentage of the eligible employees’ salaries, as well as an interest factor based upon a predetermined formula. The Company’s liabilities related to the SERP were $35.4 million and $31.6 million at September 30, 2018 and 2017, respectively. The Company recorded $5.4 million, $4.9 million and $4.6 million of expense for this plan in fiscal 2018, 2017 and 2016, respectively.

The Company has a deferred compensation plan available to a select group of employees which allows participating employees to contribute compensation into the plan on a before tax basis and defer income taxation on the contributions until the funds are withdrawn from the plan. The participating employees designate investments for their contributions; however, the Company is not required to invest the contributions in the designated investments. The Company’s net liabilities related to the deferred compensation plan were $69.3 million and $58.2 million at September 30, 2018 and 2017, respectively. The Company records as expense the amount that the employee contributions would have earned had the funds been invested in the designated investments. Related to this plan, the Company recorded expense of $5.8 million, $6.3 million and $4.0 million in fiscal 2018, 2017 and 2016, respectively.

Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan provides eligible employees the opportunity to purchase common stock of the Company at a discounted price of 85% of the fair market value of the stock on the designated dates of purchase. The price to eligible employees may be further discounted depending on the average fair market value of the stock during the period and certain other criteria. Under the terms of the plan, the total fair market value of common stock that an eligible employee may purchase each year is limited to the lesser of 15% of the employee’s annual compensation or $25,000. Under the plan, employees purchased 114,340 shares for $4.0 million in fiscal 2018, 111,527 shares for $2.8 million in fiscal 2017 and 89,652 shares for $2.2 million in fiscal 2016. At September 30, 2018, the Company had 3.1 million shares of common stock reserved for issuance pursuant to the Employee Stock Purchase Plan.

Incentive Bonus Plan

The Company’s Incentive Bonus Plan provides for the Compensation Committee to award short-term performance bonuses to senior management based upon the level of achievement of certain criteria. For fiscal 2018, 2017 and 2016, the Compensation Committee approved awards whereby certain executive officers could earn performance bonuses based upon percentages of the Company’s pre-tax income. Compensation expense related to these plans was $23.7 million, $16.8 million and $14.2 million in fiscal 2018, 2017 and 2016, respectively.

Stock-Based Compensation

The Company’s Stock Incentive Plan provides for the granting of stock options and restricted stock units to executive officers, other key employees and non-management directors. Restricted stock unit awards may be based on performance (performance-based) or on service over a requisite time period (time-based). At September 30, 2018, the Company had 29.1 million shares of common stock reserved for issuance and 18.5 million shares available for future grants under the Stock Incentive Plan.

Stock Options

Stock options are granted at exercise prices which equal the market value of the Company’s common stock at the date of the grant. The options outstanding at September 30, 2018 vest during the next year and expire 10 years after the dates on which they were granted.

The Company did not grant stock options during fiscal 2018, 2017 or 2016; however, the following table provides additional information related to stock option activity during those years.



	Year Ended September 30,
	2018				2017				2016
	Stock Options		Weighted Average Exercise Price		Stock Options		Weighted Average Exercise Price		Stock Options		Weighted Average Exercise Price
Outstanding at beginning of year	8,431,348		$	16.92	11,395,917		$	16.69	15,337,656		$	17.50
Exercised	(2,547,139	)	16.10		(2,770,569	)	15.83		(3,504,989	)	20.02
Cancelled or expired	(27,250	)	22.08		(194,000	)	18.83		(436,750	)	18.45
Outstanding at end of year	5,856,959		$	17.25	8,431,348		$	16.92	11,395,917		$	16.69
Exercisable at end of year	4,955,392		$	17.07	5,772,214		$	16.01	6,645,967		$	14.99

The aggregate intrinsic value of options exercised during fiscal 2018, 2017 and 2016 was $76.8 million, $49.5 million and $39.2 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the option exercise price.

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2018 was $146.0 million and $124.4 million, respectively. Exercise prices for options outstanding at September 30, 2018 ranged from $9.03 to $23.86. The weighted average remaining contractual lives of options outstanding and exercisable at September 30, 2018 is 3.5 years.

For fiscal 2018, 2017 and 2016, compensation expense related to stock options was $6.9 million, $15.1 million and $20.5 million, respectively. At September 30, 2018, there was approximately $1.0 million of unrecognized compensation expense related to unvested stock option awards to be recognized in fiscal 2019.

Performance-Based Restricted Stock Unit (RSU) Equity Awards

During fiscal 2018, 2017 and 2016, performance-based RSU equity awards that vest at the end of three-year performance periods were granted to the Company’s Chairman, its Chief Executive Officer and its Chief Operating Officer. The number of units that ultimately vest depends on the Company’s relative position as compared to its peers in achieving certain performance criteria and can range from 0% to 200% of the number of units granted. The performance criteria are total shareholder return, return on investment, SG&A expense containment and gross profit. The performance-based RSUs have no dividend or voting rights during the performance period. Each of these performance-based RSUs represents the contingent right to receive one share of the Company’s common stock if the vesting conditions are satisfied. Compensation expense related to these grants is based on the Company’s performance against the peer group, the elapsed portion of the performance period and the grant date fair value of the award.

The following table provides additional information related to the performance-based RSUs outstanding at September 30, 2018.



Grant Date	Vesting Date	Target Number of Performance Units	Grant Date Fair Value per Unit		Compensation Expense Year Ended September 30,
Grant Date	Vesting Date	Target Number of Performance Units	Grant Date Fair Value per Unit		2018			2017		2016
					(In millions)
November 2015	September 2018	330,000	$	30.81	$	(0.6	)	$	6.8	$	4.0
November 2016	September 2019	330,000	29.20		3.9			5.1		—
November 2017	September 2020	330,000	45.79		4.8			—		—
					$	8.1		$	11.9	$	4.0

In November 2018, the Compensation Committee approved the payout of the performance-based RSUs that vested in September 2018 in the form of 350,625 shares of common stock to satisfy the awards.

Time-Based Restricted Stock Unit (RSU) Equity Awards

Time-based RSUs represent the contingent right to receive one share of the Company’s common stock if the vesting conditions are satisfied. The time-based RSUs have no dividend or voting rights during the vesting period.

During fiscal 2018, 2017 and 2016, time-based RSUs were granted to the Company’s executive officers, other key employees and non-management directors (collectively, approximately 920, 600 and 570 recipients, respectively). These awards vest annually in equal installments over periods of three to five years. RSUs generally result in less dilution to shareholders than stock options, which have been granted to key employees in the past.

The following table provides additional information related to time-based RSU activity during fiscal 2018, 2017 and 2016.



	Year Ended September 30,
	2018				2017				2016
	Number of Restricted Stock Units		Weighted Average Grant Date Fair Value		Number of Restricted Stock Units		Weighted Average Grant Date Fair Value		Number of Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at beginning of year	4,365,782		$	26.09	3,478,233		$	24.12	1,978,262		$	25.60
Granted	1,747,870		41.82		1,868,660		28.64		2,117,330		23.14
Vested	(1,149,055	)	25.80		(792,941	)	24.48		(423,427	)	25.57
Cancelled	(166,675	)	29.56		(188,170	)	25.21		(193,932	)	25.05
Outstanding at end of year	4,797,922		$	31.77	4,365,782		$	26.09	3,478,233		$	24.12

The total fair value of shares vested on the vesting date during fiscal 2018, 2017 and 2016 was $51.0 million, $25.0 million and $12.0 million, respectively. For fiscal 2018, 2017 and 2016, compensation expense related to time-based RSUs was $39.3 million, $28.8 million and $18.7 million respectively. At September 30, 2018, there was $101.1 million of unrecognized compensation expense related to unvested time-based RSU awards. This expense is expected to be recognized over a weighted average period of 3.5 years.