Stock-based Compensation

The consolidated statements of income and other comprehensive income for fiscal 2018, 2017 and 2016 include pre-tax (after-tax) stock-based compensation expense of $18,400 ($13,037), $17,710 ($11,910) and $16,898 ($11,120). Pre-tax expense is included in operating expenses within the consolidated statements of income and other comprehensive income.

As of April 28, 2018, the total unrecognized compensation cost related to non-vested awards was $30,276, and it is expected to be recognized over a weighted average period of approximately 1.8 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 28, 2018, there were 2,115 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 28, 2018, there were 1,202 shares outstanding under prior plans.

Inducement Award

On December 1, 2017, we issued a restricted stock unit award outside our Incentive Plan to our Chief Executive Officer. The award covers 56 shares of common stock and will vest, assuming continued employment, to the extent of 50% of the award on the first anniversary of the date of grant and the remaining 50% of the award on the second anniversary of the date of grant.

Stock Option Awards

Stock options granted to employees expire no later than ten years after the date of grant. Awards typically vest over three or five 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 28, 2018			April 29, 2017			April 30, 2016
Expected dividend yield	2.2		%	2.0		%	1.8		%
Expected stock price volatility	21.6		%	21.2		%	25.6		%
Risk-free interest rate	1.9		%	1.2		%	2.1		%
Expected life (years)	6.6			6.6			6.7
Weighted average grant date fair value per share	$	8.18		$	8.32		$	9.66

The following is a summary of stock option activity:



	Number of Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value
Balance as of April 29, 2017	1,192		$	52.12
Granted	200		44.09
Exercised	(9	)	36.71
Canceled	(177	)	52.90
Balance as of April 28, 2018	1,206		$	50.82	$	31
Vested or expected to vest as of April 28, 2018	914		$	49.64	$	31
Exercisable as of April 28, 2018	87		$	37.38	$	31

The weighted average remaining contractual lives of options outstanding and options exercisable as of April 28, 2018 were 7.4 and 5.0 years, respectively.

Related to stock options exercised, the intrinsic value, cash received and tax benefits realized were $88, $324 and $3, respectively, in fiscal 2018; $266, $958 and $36, respectively, in fiscal 2017; and $901, $3,173 and $854, respectively, in fiscal 2016.

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 one or three 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 2018, 2017 and 2016 was $6,939, $8,528 and $19,805, respectively.

The following is a summary of restricted stock award activity:



	Restricted Stock Awards
	Shares		Weighted- Average Grant Date Fair Value
Outstanding at April 29, 2017	479		$	38.41
Granted	24		37.94
Vested	(132	)	34.69
Forfeitures	(67	)	37.80
Outstanding at April 28, 2018	304		$	40.13

The following is a summary of restricted stock unit activity:



	Restricted Stock Units
	Shares		Weighted- Average Grant Date Fair Value
Outstanding at April 29, 2017	304		$	47.50
Granted	330		44.48
Vested	(43	)	47.19
Forfeitures	(50	)	46.80
Outstanding at April 28, 2018	541		$	45.74

Performance Unit Awards

In fiscal 2018, 2017 and 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 three year period. We estimate the grant date fair value of the TSR awards using the Monte Carlo valuation model. In fiscal 2015, 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. No performance unit awards vested in fiscal 2018 or 2017. The total fair value of performance unit awards that vested in fiscal 2016 was $2,966.

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 29, 2017	230		$	50.88
Granted	102		45.86
Vested	—		—
Forfeitures and cancellations	(96	)	43.67
Outstanding at April 28, 2018	236		$	51.66

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 28, 2018, there were 670 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 28, 2018			April 29, 2017			April 30, 2016
Expected dividend yield	2.8		%	2.3		%	2.0		%
Expected stock price volatility	28.1		%	32.9		%	21.1		%
Risk-free interest rate	1.7		%	0.7		%	0.5		%
Expected life (years)	0.6			0.6			0.6
Weighted average grant date fair value per share	$	8.73		$	10.33		$	9.16

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 28, 2018, 1,835 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 28, 2018			April 29, 2017			April 30, 2016
Expected dividend yield	2.8		%	2.3		%	2.0		%
Expected stock price volatility	24.4		%	28.3		%	19.7		%
Risk-free interest rate	1.8		%	0.9		%	0.6		%
Expected life (years)	1.0			1.0			1.0
Weighted average grant date fair value per share	$	12.98		$	15.21		$	14.13