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Note 13. Employee Stock Option and Retirement Plans

6 Months Ended

Feb. 29, 2012

Employee Stock Option And Retirement Plans [Text Block]

13. EMPLOYEE STOCK OPTION AND RETIREMENT PLANS

During the first six months of fiscal 2012, FactSet granted 1,085,144 stock options at a weighted average exercise price of $94.84 to existing employees of the Company.

A summary of stock option activity is as follows (in thousands, except per share data):

	Number Outstanding			Weighted Average Exercise Price Per Share
Balance at August 31, 2011		6,132		$	57.28
Granted – non performance-based		420			94.84
Granted – performance-based		666			94.84
Exercised		(188	)		29.40
Forfeited		(25	)		71.49
Balance at November 30, 2011		7,005		$	63.79
Granted – non-employee Directors grant		21			87.26
Exercised		(135	)		35.34
Forfeited		(13	)		86.13
Balance at February 29, 2012		6,878		$	64.38

The total number of in-the-money options exercisable as of February 29, 2012 was 2.9 million with a weighted average exercise price of $44.43. As of August 31, 2011, 2.6 million in-the-money outstanding options were exercisable with a weighted average exercise price of $38.99. The aggregate intrinsic value of in-the-money stock options exercisable at February 29, 2012 and August 31, 2011 was $122.7 million and $129.3 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price of $87.40 at February 29, 2012 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 February 29, 2012 and February 28, 2011 was $7.2 million and $18.6 million, respectively. The total pre-tax intrinsic value of stock options exercised during the six months ended February 29, 2012 and February 28, 2011 was $18.5 million and $49.6 million, respectively.

Performance-based Stock Options

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 for both organic ASV and diluted earnings per share during the two fiscal years subsequent to the date of grant. Dependent on the financial performance levels attained by FactSet during the two subsequent fiscal years, 0%, 20%, 60% or 100% 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.

November 2010 Annual Employee Performance-based Option Grant Review

In November 2010, the Company granted 734,334 performance-based employee stock options. The number of performance-based options that vest is based on the Company achieving performance levels for both organic ASV and diluted earnings per share during the two fiscal years ended August 31, 2012. At February 29, 2012, the Company estimated that 20% or 146,867 of the performance-based stock options would vest which results in unamortized stock-based compensation expense of $1.8 million to be recognized over the remaining vesting period.

A change in the actual financial performance levels achieved by FactSet could result in the following changes to the Company’s current estimate of the vesting percentage and related expense (in thousands):

Vesting Percentage	Total Unamortized Stock-based Compensation Expense at February 29, 2012		Cumulative Catch-up Adjustment*			Average Remaining Quarterly Expense to be Recognized
0%	$	0	$	(1,216	)	$	0
20%	$	1,811	$	0		$	124
60%	$	5,433	$	2,432		$	372
100%	$	9,055	$	4,864		$	620

* Amounts represent the cumulative catch-up adjustment to be recorded for the November 2010 performance-based option grant if there had been a change in the vesting percentage as of February 29, 2012. The cumulative adjustment increments each quarter by approximately the amount stated in the average remaining quarterly expense to be recognized column.

November 2011 Annual Employee Performance-based Option Grant Review

In November 2011, the Company granted 665,551 performance-based employee stock options. The number of performance-based options that vest is based on the Company achieving performance levels for both organic ASV and diluted earnings per share during the two fiscal years ended August 31, 2013. At February 29, 2012, the Company estimated that 20% or 113,110 of the performance-based stock options would vest which results in unamortized stock-based compensation expense of $3.3 million to be recognized over the remaining vesting period.

Vesting Percentage	Total Unamortized Stock-based Compensation Expense at February 29, 2012		Cumulative Catch-up Adjustment*			Average Remaining Quarterly Expense to be Recognized
0%	$	0	$	(366	)	$	0
20%	$	3,275	$	0		$	175
60%	$	9,825	$	732		$	525
100%	$	16,375	$	1,464		$	875

* Amounts represent the cumulative catch-up adjustment to be recorded if there had been a change in the vesting percentage as of February 29, 2012. The cumulative adjustment increments each quarter by approximately the amount stated in the average remaining quarterly expense to be recognized column.

Other Performance-based Option Grants

Between June 2010 and July 2011, the Company granted 950,923 performance-based employee stock options that vest based on FactSet achieving certain ASV targets. At February 29, 2012, the Company estimated that 204,508 of the performance-based stock options will vest which results in unamortized stock-based compensation expense of $1.1 million to be recognized over the remaining vesting period of approximately 1.6 years.

A change in the actual financial performance levels achieved by FactSet due to unforeseen significant ASV growth in future fiscal years could result in the following changes to the Company’s current estimate of the vesting percentage and related expense (in thousands):

Vesting Percentage	Total Unamortized Stock-based Compensation Expense at February 29, 2012		Cumulative Catch-up Adjustment*		Average Remaining Quarterly Expense to be Recognized
0%	$	0	$	0	$	0
50%	$	5,017	$	2,608	$	386
100%	$	8,712	$	6,538	$	968

Restricted Stock and Stock Unit Awards

The Company’s option plan permits the issuance of restricted stock and restricted stock units. Restricted stock awards are subject to continued employment over a specified period. A summary of restricted stock award activity is as follows (in thousands, except per award data):

	Number Outstanding			Weighted Average Grant Date Fair Value Per Award
Balance at August 31, 2011		407		$	71.31
Granted (restricted stock and stock units)		0		$	0
Vested		0		$	0
Canceled/forfeited		(2	)	$	70.66
Balance at November 30, 2011		405		$	71.31
Granted (restricted stock and stock units)		0		$	0
Vested		0		$	0
Canceled/forfeited		(1	)	$	73.90
Balance at February 29, 2012		404		$	71.30

There were no restricted stock awards granted during the first six months of fiscal 2012.

During the first six months of fiscal 2011, the following restricted stock award was granted.

November 2010 Employee Restricted Stock Award

In November 2010, the Company granted 117,723 restricted stock awards which entitle the holder to shares of common stock as the awards vest over time. The Company’s restricted stock awards cliff vest 60% after three years and the remaining 40% after five years. Restricted stock grants are amortized to expense over the vesting period using the straight-line attribution method. Employees granted restricted stock awards in November 2010 are not entitled to dividends declared on the underlying shares while the restricted stock is unvested. As such, the grant date fair value of the award was measured by reducing the grant date price of FactSet’s share by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate. The resulting fair value of the restricted stock awards granted in November 2010 was $84.38. As of February 29, 2012, unamortized stock-based compensation expense of $6.1 million is to be amortized to compensation expense over the remaining vesting period.

Other Employee Restricted Stock and Stock Unit Awards

Between November 2010 and January 2011, the Company granted 5,376 restricted stock awards which entitle the holder to shares of common stock as the awards vest over time. As of February 29, 2012, unamortized stock-based compensation expense of $0.1 million is to be amortized to compensation expense over the remaining vesting period.

Share-based Awards Available for Grant

A summary of share-based awards available for grant is as follows (in thousands):

	Share-based Awards Available for Grant under the Employee Option Plan			Share-based Awards Available for Grant under the Non-Employee Directors Plan
Balance at August 31, 2011		4,977			147
Granted – non performance-based options		(666	)		0
Granted – performance-based options		(420	)		0
Share-based awards canceled/forfeited*		31			0
Balance at November 30, 2011		3,922			147
Granted – non-employee Directors grant		0			(21	)
Share-based awards canceled/forfeited*		16			0
Balance at February 29, 2012		3,938			126

* 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.

Employee Stock Purchase Plan

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.

During the three months ended February 29, 2012, employees purchased 19,690 shares at a weighted average price of $74.29 as compared to 16,872 shares at a weighted average price of $77.09 in the same period a year ago. At February 29, 2012, 237,682 shares were reserved for future issuance under the Purchase Plan.

401(k) Plan

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 $3.1 and $3.0 million in matching contributions to employee 401(k) accounts during the six months ended February 29, 2012 and February 28, 2011, respectively.