5. EQUITY COMPENSATION PLANS

Qualified and non-qualified options to purchase shares of common stock may be granted to directors, officers and employees of the Company under the terms of the Company’s stock option plans. These options are granted at an exercise price of not less than the fair market value of the stock on the date of grant. Options vest ratably over three and five year periods and the contractual terms are generally five or ten years. A summary of stock option activity during the three months ended August 31, 2017 follows:


				Weighted-
				Average
	Shares			Exercise Price
Options outstanding June 1, 2017		2,031,000		$	43.84
Granted		75,000			63.95
Exercised		(46,000	)		31.66
Forfeited		—

Options outstanding August 31, 2017		2,060,000			44.85

During the three month period ended August 31, 2017 and 2016, the Company recorded $1,401,000 and $1,516,000, respectively, of compensation expense related to its share-based awards. On June 1, 2017, the Company adopted ASU No. 2016-09, which simplifies the accounting for share-based payments to employees. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. The guidance also allows for a policy election to account for forfeitures as they occur, rather than on an estimated basis, and requires that excess tax benefits be classified as an operating activity on the Statement of Cash Flows. The Company has elected to account for forfeitures as they occur. The adoption of this ASU reduced income tax expense by $396,000 in the first quarter of fiscal 2018.

The weighted-average fair value per share of stock options granted during fiscal years 2018 and 2017, estimated on the date of grant using the Black-Scholes option pricing model, was $15.59 and $15.86, respectively. The fair value of stock options granted was estimated using the following weighted-average assumptions.


	FY2018			FY2017
Risk-free interest rate		1.6	%		1.2	%
Expected dividend yield		0.0	%		0.0	%
Expected stock price volatility		27.2	%		35.2	%
Expected option life		4.0	years		4.0	years

The Company has an employee stock purchase plan that provides for employee stock purchases at a 5% discount to market price. The discount is recorded in administrative expense as of the date of purchase.