Note 13 - Employee Stock Option and Retirement Plans | 9 Months Ended |
31-May-14 |
Employee Stock Option And Retirement Plans [Abstract] | ' |
Employee Stock Option And Retirement Plans [Text Block] | ' |
13. EMPLOYEE STOCK OPTION AND RETIREMENT PLANS |
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Stock Option Awards |
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Options granted without performance conditions under the Company’s stock option plans expire either seven or ten years from the date of grant and the majority vest at a rate of 20% after the first year and 1.67% per month thereafter for years two through five. Options become vested and exercisable provided the employee continues employment with the Company through the applicable vesting date and remain exercisable until expiration or cancellation. The majority of options granted with performance conditions expire ten years from the date of grant and vest at a rate of 40% after the first two years and 1.67% per month thereafter for years three through five. Options are not transferable or assignable other than by will or the laws of descent and distribution. During the grantee’s lifetime, they may be exercised only by the grantee. |
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During the first nine months of fiscal 2014, FactSet granted 391,478 stock options at a weighted average exercise price of $106.73 to existing employees of the Company. |
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A summary of stock option activity is as follows (in thousands, except per share data): |
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| | Number Outstanding | | | Weighted Average Exercise Price Per Share | | | | | |
Balance at August 31, 2013 | | | 4,729 | | | $ | 75.95 | | | | | |
Granted – non-performance-based | | | 36 | | | | 108.64 | | | | | |
Granted – performance-based | | | 36 | | | | 110.31 | | | | | |
Exercised | | | (136 | ) | | | 59.38 | | | | | |
Forfeited | | | (10 | ) | | | 79.22 | | | | | |
Balance at November 30, 2013 | | | 4,655 | | | $ | 76.94 | | | | | |
Granted – non-performance-based | | | 139 | | | | 102.01 | | | | | |
Granted – performance-based | | | 166 | | | | 109.39 | | | | | |
Granted – non-employee Directors grant | | | 14 | | | | 107.65 | | | | | |
Exercised | | | (136 | ) | | | 40.99 | | | | | |
Forfeited | | | (24 | ) | | | 86.75 | | | | | |
Balance at February 28, 2014 | | | 4,814 | | | $ | 79.85 | | | | | |
Exercised | | | (142 | ) | | | 59.17 | | | | | |
Forfeited | | | (16 | ) | | | 94.48 | | | | | |
Balance at May 31, 2014 | | | 4,656 | | | $ | 80.42 | | | | | |
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The total number of in-the-money options exercisable as of May 31, 2014 was 2.1 million with a weighted average exercise price of $66.34. As of August 31, 2013, 1.9 million in-the-money outstanding options were exercisable with a weighted average exercise price of $59.70. The aggregate intrinsic value of in-the-money stock options exercisable at May 31, 2014 and August 31, 2013 was $86.3 million and $82.1 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price of $107.14 at May 31, 2014 and the exercise price multiplied by the number of options exercisable as of that date. The total pre-tax intrinsic value of stock options exercised during the three months ended May 31, 2014 and 2013 was $6.9 million and $31.4 million, respectively. The total pre-tax intrinsic value of stock options exercised during the nine months ended May 31, 2014 and 2013 was $22.9 million and $61.5 million, respectively. |
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Performance-based Stock Options |
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Performance-based stock options require management to make assumptions regarding the likelihood of achieving Company performance targets. The number of performance-based options that vest will be predicated on the Company achieving performance levels during the measurement period subsequent to the date of grant. Dependent on the financial performance levels attained by FactSet, a percentage of the performance-based stock options will vest to the grantees of those stock options. However, there is no current guarantee that such options will vest in whole or in part. |
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November 2012 Annual Employee Performance-based Option Grant Review |
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In November 2012, FactSet granted 1,011,510 performance-based employee stock options. The number of performance-based options that vest is based on the Company achieving performance levels for both organic annual subscription value and diluted earnings per share during the two fiscal years ended August 31, 2014. At May 31, 2014, FactSet estimated that 20% or 202,302 of the performance-based stock options would vest which results in unamortized stock-based compensation expense of $2.5 million to be recognized over the remaining vesting period of 3.4 years. However, a change in the actual financial performance levels achieved during the fourth quarter of 2014 could result in the following changes to the Company’s current estimate of the vesting percentage and related expense (in thousands): |
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Vesting | | Total Unamortized Stock-based | | | Cumulative Catch-up Adjustment* | | | Average Remaining Quarterly Expense to be Recognized | |
Percentage | Compensation Expense at May 31, 2014 |
0% | | $ | 0 | | | $ | (2,265 | ) | | $ | 0 | |
20% | | $ | 2,483 | | | $ | 0 | | | $ | 182 | |
60% | | $ | 7,449 | | | $ | 4,530 | | | $ | 545 | |
100% | | $ | 12,415 | | | $ | 9,060 | | | $ | 908 | |
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* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of May 31, 2014. |
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July 2012 Performance-based Option Grant Review |
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In July 2012, FactSet granted 241,546 performance-based employee stock options, which are eligible to vest in 20% tranches depending upon future StreetAccount user growth through August 31, 2017. As a result of the accelerated expansion of StreetAccount users during the third quarter of fiscal 2014, FactSet determined that the second 20% tranche will vest by August 31, 2014. In addition, due to the accelerated third quarter growth and forecasted future usage growth, the Company estimated that the third 20% tranche will vest by August 31, 2017. This reflected a higher performance level than previously estimated and accordingly increased the number of options that will vest to a total 60%, which required FactSet to record a pre-tax stock-based compensation charge of $1.4 million in the third quarter of fiscal 2014. The change in estimate also results in unamortized stock-based compensation expense of $1.2 million to be recognized over the remaining vesting period of 3.3 years. |
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A change, up or down, in the actual financial performance levels achieved by StreetAccount in future fiscal years could result in the following changes to the current estimate of the vesting percentage and related expense (in thousands): |
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Vesting | | Cumulative | | | Remaining Expense | | | | | |
Percentage | Catch-up Adjustment* | to be Recognized | | | | |
Third 20% | | $ | (594 | ) | | $ | 1,006 | | | | | |
Fourth 20% | | $ | 736 | | | $ | 2,055 | | | | | |
Fifth 20% | | $ | 1,704 | | | $ | 2,687 | | | | | |
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* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of May 31, 2014. |
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Matrix and Revere Performance-based Option Grants |
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In connection with the acquisitions of Matrix and Revere during fiscal 2014, FactSet granted 165,949 and 36,695 performance-based stock options, respectively. The performance-based options granted in connection with the acquisition of Matrix will vest only if ASV and operating margin targets related to the Matrix business are met during a five year measurement period ending December 23, 2018, and the option holders remain employed by FactSet. As of May 31, 2014 FactSet does not believe these targets are probable of being achieved, and as such, no stock-based compensation expense is expected to be realized in connection with these options. Of the 36,695 performance-based stock options granted in connection with the Revere acquisition, FactSet currently estimates that 18,553 options will vest based upon the achievement of certain ASV and operating margins during the measurement period ending August 31, 2015. This results in unamortized stock-based compensation expense of $0.5 million to be recognized over the remaining vesting period of 4.2 years. |
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Restricted Stock and Stock Unit Awards |
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The Company’s stock option and award plan permits the issuance of restricted stock and restricted stock units. Restricted stock awards are subject to continued employment over a specified period. During the first nine months of fiscal 2014, FactSet granted 204,124 restricted stock awards at a weighted average grant date fair value of $101.95 to employees of the Company. |
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A summary of restricted stock award activity is as follows (in thousands, except per award data): |
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| | Number Outstanding | | | Weighted Average Grant | | | | | |
Date Fair Value Per Award | | | | |
Balance at August 31, 2013 | | | 358 | | | $ | 80.43 | | | | | |
Granted (restricted stock and stock units) | | | 162 | | | $ | 102.27 | | | | | |
Vested | | | (63 | ) | | $ | 83.49 | | | | | |
Canceled/forfeited | | | (2 | ) | | $ | 69.27 | | | | | |
Balance at November 30, 2013 | | | 455 | | | $ | 87.69 | | | | | |
Granted (restricted stock and stock units) | | | 42 | | | $ | 100.7 | | | | | |
Vested | | | (17 | ) | | $ | 60.28 | | | | | |
Canceled/forfeited | | | (4 | ) | | $ | 97.28 | | | | | |
Balance at February 28, 2014 | | | 476 | | | $ | 89.79 | | | | | |
Vested* | | | (55 | ) | | $ | 93.12 | | | | | |
Canceled/forfeited | | | (3 | ) | | $ | 89.77 | | | | | |
Balance at May 31, 2014 | | | 418 | | | $ | 89.34 | | | | | |
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* Of the total 55,431 restricted stock awards that vested during the third quarter of fiscal 2014, 29,087 related to awards granted on April 14, 2011 at the grant date price of $103.30. These restricted stock awards cliff vested 100% after three years on April 14, 2014. The awards were amortized to expense over the vesting period using the straight-line attribution method. The remaining 26,344 restricted stock awards that vested during the third quarter were granted on April 8, 2013 and cliff vest 20% annually upon each anniversary date of the grant. |
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November 2013 Employee Restricted Stock Award |
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On November 1, 2013, FactSet granted 153,972 restricted stock awards with a fair value of $102.22, which entitle the holder to shares of common stock as the awards vest over time. These restricted stock awards cliff vest 60% after three years (on November 1, 2016) and the remaining 40% after five years (on November 1, 2018). As of May 31, 2014 unamortized stock-based compensation expense of $12.0 million is to be amortized ratably to compensation expense over the remaining vesting period of 4.4 years. |
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Matrix and Revere Restricted Stock Units |
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In connection with the acquisitions of Matrix and Revere, FactSet granted 30,144 and 7,744 performance-based restricted stock units, respectively. The Matrix restricted stock units cliff vest 20% annually upon each anniversary date of the grant and as of May 31, 2014 unamortized stock-based compensation expense of $2.8 million is to be amortized ratably to compensation expense over the remaining vesting period of 4.6 years. Of the 7,744 performance-based restricted stock units granted in connection with the Revere acquisition, 3,872 are estimated to vest based upon management’s belief that certain of the ASV and operating margin targets will be achieved during the measurement period ending August 31, 2017. As of May 31, 2014 unamortized stock-based compensation of $0.3 million will be amortized to compensation expense over the remaining vesting period of 4.3 years. The remaining 3,872 performance-based restricted stock units granted in connection with the Revere acquisition are expected to be forfeited. |
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Other Restricted Stock Units |
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An additional 12,264 restricted stock awards were granted during the first nine months of fiscal 2014 to existing employees of FactSet. These restricted stock awards cliff vest 60% after three years, with the remaining 40% vesting on the fifth year anniversary date. As of May 31, 2014 unamortized stock-based compensation of $1.0 million will be amortized to compensation expense over the remaining vesting period of 4.7 years. |
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Share-based Awards Available for Grant |
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A summary of share-based awards available for grant is as follows (in thousands): |
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| | Share-based Awards | | | Share-based Awards | | | | | |
Available for Grant under | Available for Grant under | | | | |
the Employee Option Plan | the Non-Employee Directors Plan | | | | |
Balance at August 31, 2013 | | | 3,116 | | | | 107 | | | | | |
Granted – non performance-based options | | | (36 | ) | | | 0 | | | | | |
Granted – performance-based options | | | (36 | ) | | | 0 | | | | | |
Restricted stock awards granted* | | | (404 | ) | | | 0 | | | | | |
Share-based awards canceled/forfeited* | | | 16 | | | | 0 | | | | | |
Balance at November 30, 2013 | | | 2,656 | | | | 107 | | | | | |
Granted – non performance-based options | | | (139 | ) | | | (14 | ) | | | | |
Granted – performance-based options | | | (166 | ) | | | 0 | | | | | |
Restricted stock awards granted* | | | (106 | ) | | | 0 | | | | | |
Share-based awards canceled/forfeited* | | | 35 | | | | 9 | | | | | |
Balance at February 28, 2014 | | | 2,280 | | | | 102 | | | | | |
Share-based awards canceled/forfeited* | | | 21 | | | | 0 | | | | | |
Balance at May 31, 2014 | | | 2,301 | | | | 102 | | | | | |
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* Under the Company’s option plan, for each restricted stock award canceled/forfeited, an equivalent of 2.5 shares is added back to the available share-based awards balance. |
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Employee Stock Purchase Plan |
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On December 16, 2008, the Company’s stockholders ratified the adoption of the FactSet Research Systems Inc. 2008 Employee Stock Purchase Plan (the “Purchase Plan”). A total of 500,000 shares have been reserved for issuance under the Purchase Plan. There is no expiration date for the Purchase Plan. Shares of FactSet common stock may be purchased by eligible employees under the Purchase Plan in three-month intervals at a purchase price equal to at least 85% of the lesser of the fair market value of the Company’s common stock on either the first day or the last day of each three-month offering period. Employee purchases may not exceed 10% of their gross compensation during an offering period. |
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During the three months ended May 31, 2014, employees purchased 18,068 shares at a weighted average price of $88.55 as compared to 16,739 shares at a weighted average price of $82.67 in the same period a year ago. During the nine months ended May 31, 2014, employees purchased 54,597 shares at a weighted average price of $88.33 as compared to 56,230 shares at a weighted average price of $79.77 in the same period a year ago. At May 31, 2014, 65,173 shares were reserved for future issuance under the Purchase Plan. |
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401(k) Plan |
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The Company established a 401(k) Plan (the “401(k) Plan”) in fiscal 1993. The 401(k) Plan is a defined contribution plan covering all full-time, U.S. employees of the Company and is subject to the provisions of the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986. Each year, participants may contribute up to 60% of their eligible annual compensation, subject to annual limitations established by the Internal Revenue Code. The Company matches up to 4% of employees’ earnings, capped at the IRS annual maximum. Company matching contributions are subject to a five year graduated vesting schedule. All full-time, U.S. employees are eligible for the matching contribution by the Company. The Company contributed $5.7 million and $5.5 million in matching contributions to employee 401(k) accounts during the nine months ended May 31, 2014 and 2013, respectively. |