Stock-based Payment Compensation

3 Months Ended

Oct. 31, 2014

NOTE 7 – Stock-based Payment Compensation

The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the award. The following is a summary of option activity for the Company’s stock options for the three months ended October 31, 2014:

(In thousands, except per share and term data)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)		Aggregate Intrinsic Value
Outstanding as of July 31, 2014		19,082		$	21.64		6.01	$	235,734
Grants of options		85			31.49
Exercises		(309	)		19.04
Forfeitures or expirations		―			―
Outstanding as of October 31, 2014		18,858		$	21.73		5.88	$	232,305
Exercisable as of October 31, 2014		13,032		$	16.33		4.55	$	223,012

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. The number of options that were in-the-money was 13,911,139 million at October 31, 2014.

The table below sets forth the stock-based payment compensation recognized by the Company:

	Three Months Ended October 31,
(In thousands)	2014		2013
General and administrative	$	3,820	$	4,232
Yard Operations		546		635
Total stock-based compensation	$	4,366	$	4,867

In accordance with ASC 718, Compensation – Stock Compensation, the Company made an estimate of expected forfeitures and is recognizing compensation cost only for those equity awards expected to vest.

In October 2013, the Compensation Committee of the Company’s Board of Directors approved the grant of nonqualified stock options to purchase 2,000,000 and 1,500,000 shares of the Company’s common stock to A. Jayson Adair, the Company’s Chief Executive Officer, and Vincent W. Mitz, the Company’s President, respectively. Following stockholder approval of the proposed grants at a meeting of stockholders, the nonqualified stock options were granted at an exercise price of $35.62 per share, which equaled the closing price of the Company’s common stock on December 16, 2013, the effective date of grant. Such grants were made in lieu of any cash salary or bonus compensation in excess of $1.00 per year or the grant of any additional equity incentives for a five-year period. Each option will become exercisable over five years, subject to continued service by Mr. Adair and Mr. Mitz, with twenty percent (20%) vesting on April 15, 2015 and December 16, 2014, respectively, and the balance vesting monthly over the subsequent four years. Each option will become fully vested, assuming continued service on April 15, 2019 and December 16, 2018, respectively. If, prior to a change in control, either executive’s employment is terminated without cause, then one hundred percent (100%) of the shares subject to that executive’s stock option will immediately vest. If, upon or following a change in control, either the Company or a successor entity terminates the executive’s service without cause, or the executive resigns for good reason (as defined in the option agreement), then one hundred percent (100%) of the shares subject to his stock option will immediately vest. The fair value of each option at the date of grant was $11.43. The total estimated compensation expense to be recognized by the Company over the five year estimated service period for these options is $40.0 million. The Company recognized $1.9 million in compensation expenses for these grants in the three months ended October 31, 2014.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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