Stock-based Compensation

The consolidated statements of income for fiscal years 2016, 2015 and 2014 include pre-tax (after-tax) stock-based compensation expense of $16,898 ($11,120), $13,958 ($9,171) and $8,041 ($5,416). Pre-tax expense is included in operating expenses within the consolidated statements of income. Tax benefits associated with tax deductions in excess of recognized stock-based compensation expense are presented as a financing cash inflow.

As of April 30, 2016, the total unrecognized compensation cost related to non-vested awards was $34,772, and it is expected to be recognized over a weighted average period of approximately 2.3 years.

2015 Omnibus Incentive Plan

In September 2015, our shareholders approved the 2015 Omnibus Incentive Plan ("Incentive Plan"). The aggregate number of shares of common stock that may be issued is 4,000. The Incentive Plan authorizes various award types to be issued under the plan, including stock options, restricted stock awards, restricted stock units, stock appreciation rights, performance awards, non-employee director awards, cash-based awards and other stock-based awards. We issue new shares for stock option exercises, restricted stock award grants and also for vesting of restricted stock units and performance stock units. Awards that expire or are canceled without delivery of shares generally become available for reissuance under the plan.

At April 30, 2016, there were 3,784 shares available for awards under the Incentive Plan.

As a result of the approval of the Incentive Plan, awards are no longer granted under any prior equity incentive plan, but all outstanding awards previously granted under such prior plans will remain outstanding and subject to the terms of such prior plans. At April 30, 2016, there were 1,073 shares outstanding under prior plans.

Stock Option Awards

Stock options granted to employees expire no later than 10 years after the date of grant. Awards typically vest over 3 or 5 years.

The fair value of stock options granted was estimated as of the grant date using a Black-Scholes option-pricing model with the following assumptions:



	Fiscal Year Ended
	April 30, 2016			April 25, 2015			April 26, 2014
Expected dividend yield	1.8		%	2.0		%	1.8		%
Expected stock price volatility	25.6		%	26.3		%	30.0		%
Risk-free interest rate	2.1		%	2.1		%	1.5		%
Expected life (years)	6.7			7.0			7.1
Weighted average grant date fair value per share	$	9.66		$	9.78		$	11.02

The following is a summary of stock option activity:



	Number of Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of April 25, 2015	338		$	36.22
Granted	923		55.39
Exercised	(87	)	36.49
Canceled	(64	)	39.03
Balance as of April 30, 2016	1,110		$	52.09	$	1,402
Vested or expected to vest as of April 30, 2016	1,046		$	52.17	$	1,279
Exercisable as of April 30, 2016	49		$	35.22	$	402

The weighted average remaining contractual lives of options outstanding and options exercisable as of April 30, 2016 were 8.6 and 4.3 years, respectively.

Related to stock options exercised, the intrinsic value, cash received and tax benefits realized were $901, $3,173 and $854, respectively, in fiscal 2016; $290, $1,710 and $286, respectively, in fiscal 2015; and $1,722, $12,309 and $1,273, respectively, in fiscal 2014.

Restricted Stock

Restricted stock awards and restricted stock units granted to employees generally vest over a five, seven or nine year period. Certain restricted stock awards, which are held by branch managers, are subject to accelerated vesting provisions beginning three years after the grant date, based on certain operating goals. Restricted stock awards are also granted to non-employee directors annually and vest over 1 or 3 years. The grant date fair value of restricted stock awards and restricted stock units is based on the closing stock price on the day of the grant. The total fair value of restricted stock awards and restricted stock units that vested in fiscal 2016, 2015 and 2014 was $19,805, $8,474 and $6,831, respectively.

The following is a summary of restricted stock award activity:



	Restricted Stock Awards
	Shares		Weighted- Average Grant Date Fair Value
Outstanding at April 25, 2015	1,168		$	34.39
Granted	191		48.91
Vested	(421	)	33.33
Forfeitures	(178	)	36.34
Outstanding at April 30, 2016	760		$	38.18

The following is a summary of restricted stock unit activity:



	Restricted Stock Units
	Shares		Weighted- Average Grant Date Fair Value
Outstanding at April 25, 2015	122		35.30
Granted	66		44.88
Vested	(6	)	39.54
Forfeitures	(111	)	35.03
Outstanding at April 30, 2016	71		$	44.26

Performance Unit Awards

In fiscal 2015 and 2014, we granted performance unit awards, primarily to executive management, which are earned at the end of a three year period if certain operating goals are met. Accordingly, we recognize expense over the requisite service period based on the outcome that is probable for these awards. In fiscal 2016, we granted performance unit awards with a market-based condition to certain executives. The number of shares to be received at vesting will range from 0% - 200% of the target number of stock units based on Patterson's total shareholder return ("TSR") relative to the performance of companies in the S&P Midcap 400 Index measured over a 3 year period. We estimate the grant date fair value of the TSR awards using the Monte Carlo valuation model. The total fair value of performance unit awards that vested in fiscal 2016 was $2,966. No performance unit awards vested in fiscal 2015 and 2014.

The following is a summary of performance unit award activity at target:



	Performance Unit Awards
	Shares		Weighted- Average Grant Date Fair Value
Outstanding at April 25, 2015	205		$	38.91
Granted	87		54.55
Vested	(78	)	37.70
Forfeitures and cancellations	(57	)	40.69
Outstanding at April 30, 2016	157		$	47.56

Employee Stock Purchase Plan ("ESPP")

We sponsor an ESPP under which a total of 6,750 shares have been reserved for purchase by employees. Eligible employees may purchase shares at 85% of the lower of the fair market value of our common stock on the beginning of the annual offering period, or on the end of each quarterly purchase period, which occur on March 31, June 30, September 30 and December 31. The offering periods begin on January 1 of each calendar year and end on December 31 of each calendar year. At April 30, 2016, there were 1,269 shares available for purchase under the ESPP.

We estimate the grant date fair value of shares purchased under our ESPP using the Black-Scholes option pricing valuation model with the following weighted average assumptions:



	Fiscal Year Ended
	April 30, 2016			April 25, 2015			April 26, 2014
Expected dividend yield	2.0		%	1.6		%	1.6		%
Expected stock price volatility	21.1		%	31.0		%	31.0		%
Risk-free interest rate	0.5		%	0.1		%	0.2		%
Expected life (years)	0.6			0.5			0.5
Weighted average grant date fair value per share	$	9.16		$	10.74		$	9.46

Capital Accumulation Plan ("CAP")

We also sponsor an employee CAP. A total of 6,000 shares of common stock are reserved for issuance under the CAP. Key employees of Patterson are eligible to participate by purchasing common stock through payroll deductions at 75% of the price of the common stock at the beginning of or the end of the calendar year, whichever is lower. The shares issued are restricted stock and are held in the custody of Patterson until the restrictions lapse. The restriction period is typically three years from the beginning of the plan year, and shares are subject to forfeiture provisions. At April 30, 2016, 2,018 shares were available for purchase under the CAP.

We estimate the grant date fair value of shares purchased under our CAP using the Black-Scholes option pricing valuation model with the following weighted average assumptions:



	Fiscal Year Ended
	April 30, 2016			April 25, 2015			April 26, 2014
Expected dividend yield	2.0		%	1.6		%	1.6		%
Expected stock price volatility	19.7		%	31.0		%	31.0		%
Risk-free interest rate	0.6		%	0.3		%	0.3		%
Expected life (years)	1.0			1.0			1.0
Weighted average grant date fair value per share	$	14.13		$	17.67		$	15.00