Note 14 - Employee Stock Option and Retirement Plans

12 Months Ended

Aug. 31, 2014

Employee Stock Option And Retirement Plans [Abstract]

Employee Stock Option And Retirement Plans [Text Block]

14. EMPLOYEE STOCK OPTION AND RETIREMENT PLANS

Stock Options

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. Majority of the 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.

Stock Option Activity

In fiscal years 2014, 2013 and 2012, stock options to purchase 391,478, 1,674,966, and 1,468,513 shares of common stock, respectively, at prices which ranged from $87.26 to $110.31 were granted to existing employees and non-employee directors 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		540			93.96
Granted – performance-based		907			93.80
Granted – non-employee Directors grant		21			87.26
Exercised		(731	)		35.96
Forfeited*		(786	)		87.37
Balance at August 31, 2012		6,083		$	64.76
Granted – non performance-based		645			92.22
Granted – performance-based		1,011			92.22
Granted – non-employee Directors grant		19			91.06
Exercised		(2,286	)		52.25
Forfeited**		(743	)		93.84
Balance at August 31, 2013		4,729		$	75.95
Granted – non performance-based		174			103.36
Granted – performance-based		203			109.56
Granted – non-employee Directors grant		14			107.65
Exercised		(789	)		57.56
Forfeited***		(849	)		91.98
Balance at August 31, 2014		3,482		$	79.67

* In November 2010, the Company granted 734,334 performance-based employee stock options. None of these performance-based stock options granted vested because FactSet did not achieve certain performance levels during the two fiscal years ended August 31, 2012. As such, these stock options were recorded as forfeitures in August 2012.

** In November 2011, the Company granted 665,551 performance-based employee stock options. None of these performance-based stock options granted vested because FactSet did not achieve certain performance levels during the two fiscal years ended August 31, 2013. As such, these stock options were recorded as forfeitures in August 2013.

*** Included in the number of stock options forfeited during fiscal 2014 were 791,348 shares that related to previously granted performance-based stock options. In November 2012, FactSet granted 1,011,510 performance-based employee stock options. Based upon the actual growth in both organic ASV and diluted EPS during the two fiscal years ended August 31, 2014, 20% of the shares became eligible to vest on August 31, 2014 and the remaining were recorded as forfeitures in 2014.

Stock Options Outstanding and Exercisable

The following table summarizes ranges of outstanding and exercisable options as of August 31, 2014 (in thousands, except per share data and the weighted average remaining years of contractual life):

					Outstanding						Exercisable
Range of Exercise Prices Per Share			Number Outstanding		Weighted Average Remaining Years of Contractual Life		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Number Exercisable		Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value
$29.00	-	$58.78		356		0.9	$	35.28	$	32,845		356	$	35.28	$	32,845
$63.09	-	$65.67		527		1.7	$	64.23	$	33,265		386	$	64.65	$	24,211
$66.46	-	$66.81		565		2.1	$	66.47	$	34,411		528	$	66.47	$	32,188
$87.26	-	$91.06		489		6.5	$	90.21	$	18,192		229	$	89.80	$	8,599
$92.22	-	$92.55		751		8.1	$	92.22	$	26,416		195	$	92.23	$	6,852
$94.84	-	$103.30		542		7.5	$	96.90	$	16,535		205	$	95.11	$	6,612
$107.65	-	$110.31		252		9.1	$	109.32	$	4,559		0	$	109.32	$	0
Total Fiscal 2014				3,482		5.2	$	79.67	$	166,223		1,899	$	68.78	$	111,307

Prior Year Amounts		2013				2012
	Number of Shares		Weighted Average Exercise Price Per Share		Number of Shares		Weighted Average Exercise Price Per Share
Outstanding at fiscal year end		4,729	$	75.95		6,083	$	64.76
Exercisable at fiscal year end		1,925	$	59.70		2,858	$	48.44

The aggregate intrinsic value of in-the-money stock options exercisable at August 31, 2014 and 2013 was $111.3 million and $82.1 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price of $127.40 at August 31, 2014 and the exercise price multiplied by the number of options exercisable as of that date. The weighted average remaining contractual life of stock options exercisable at August 31, 2014 and 2013 was 3.4 years and 2.8 years, respectively. The total pre-tax intrinsic value of stock options exercised during fiscal 2014, 2013 and 2012 was $44.0 million, $99.1 million, and $43.0 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 2012 Annual Employee Performance-based Option Grant Review

In November 2012, FactSet granted 1,011,510 performance-based employee stock options. The number of performance-based options that would become eligible to vest was based upon the Company achieving performance levels for both organic ASV and diluted earnings per share during the two fiscal years ended August 31, 2014. Based upon the actual growth in organic ASV and diluted EPS through August 31, 2014, 20%, or 185,014 (net of options forfeited through the end of fiscal 2014), of the previously granted shares became eligible to vest on August 31, 2014 with 40% scheduled to vest on November 1, 2014 and the remaining 60% will vest at a monthly rate of 1.67% through October 2017. As of the end of fiscal 2014, total unamortized stock-based compensation expense of $2.1 million will be recognized over the remaining vesting period of 3.1 years in connection with this grant.

July 2012 Performance-based Option Grant Review

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. During the fourth quarter of fiscal 2013, the StreetAccount business achieved the growth target as outlined within the terms of the grant, thus 20% or 48,314 options vested on August 31, 2013. The second 20% tranche vested on August 31, 2014 as a result of accelerated expansion of Street Account users. In addition, due to the accelerated 2014 growth and forecasted future usage growth, the Company estimated that the third 20% tranche would 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 $0.9 million to be recognized over the remaining vesting period of 3.0 years.

Matrix and Revere Performance-based Option Grants

In connection with the acquisitions of Matrix and Revere during fiscal 2014, FactSet granted 165,949 and 36,695 performance-based stock options, to senior management of those companies, 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 August 31, 2014 FactSet did not believe these targets were 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 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 view results in unamortized stock-based compensation expense of $0.5 million to be recognized over the remaining vesting period of 4.0 years.

Restricted Stockand Stock Unit Awards

The Company’s option plans permit 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)		-			-
Vested		(14	)		69.02
Canceled/forfeited		(10	)		77.13
Balance at August 31, 2012		383		$	71.34
Granted (restricted stock and stock units)		132			85.80
Vested*		(150	)		62.34
Canceled/forfeited		(7	)		81.38
Balance at August 31, 2013		358		$	80.43
Granted (restricted stock and stock units)		204			101.95
Vested**		(135	)		84.48
Canceled/forfeited		(59	)		86.39
Balance at August 31, 2014		368		$	89.77

*Of the total 149,741 restricted stock awards that vested during fiscal 2013, 87,758 related to awards granted on October 23, 2009. These restricted stock awards cliff vested 60% after three years (on October 23, 2012) and the remaining 40% will vest after five years (on October 23, 2014). An additional 55,572 awards that vested in fiscal 2013 related to awards granted on February 9, 2010 which cliff vested 100% after three years (on February 9, 2013). The remaining 6,411 restricted stock awards that vested were previously granted between June 2010 and July 2011 and vesting occurred when certain ASV targets were met in fiscal 2013.

** The 135,205 restricted stock awards that vested during fiscal 2014 were comprised of: 62,544 of awards granted on November 8, 2010, which cliff vested 60% after three years (on November 8, 2013) with the remaining 40% cliff vesting after five years (on November 8, 2015); 29,087 of awards granted on April 14, 2011, which vested 100% after three years on April 14, 2014; 26,344 restricted stock awards that were granted on April 8, 2013, which cliff vest 20% annually upon the anniversary date of the grant; and 17,230 awards relating to restricted stock granted on February 9, 2010 which cliff vested 50% after four years (on February 9, 2014) and the remaining 50% vesting after six years on February 9, 2016.

November 2013 Employee Restricted Stock Award

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 August 31, 2014 unamortized stock-based compensation expense of $11.3 million is to be amortized ratably to compensation expense over the remaining vesting period of 4.2 years.

Matrix and Revere Restricted Stock Units

In connection with the acquisitions of Matrix and Revere, FactSet granted 30,144 restricted stock units and 7,744 performance-based restricted stock units, respectively. The Matrix restricted stock units cliff vest 60% after three years with the remaining 40% vesting after five years. As of August 31, 2014 unamortized stock-based compensation expense of $2.7 million is to be amortized ratably to compensation expense over the remaining vesting period of 4.3 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 ASV and operating margin targets will be achieved during the measurement period ending August 31, 2017. As of August 31, 2014 unamortized stock-based compensation of $0.3 million will be amortized to compensation expense over the remaining vesting period of 4.0 years. The remaining 3,872 performance-based restricted stock units granted in connection with the Revere acquisition are expected to be forfeited.

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 Employee Stock Option Plans			Share-based Awards Available for Grant under Non-Employee Stock Option Plans
Balance at August 31, 2011		4,977			147
Granted – non performance-based options		(540	)		-
Granted – performance-based options		(907	)		-
Granted – non-employee Directors grant		-			(21	)
Restricted stock awards granted*		-			-
Share-based awards canceled/forfeited		810			-
Balance at August 31, 2012		4,340			126
Granted – non performance-based options		(645	)		-
Granted – performance-based options		(1,011	)		-
Granted – non-employee Directors grant		-			(19	)
Restricted stock awards granted*		(329	)		-
Share-based awards canceled/forfeited		761			-
Balance at August 31, 2013		3,116			107
Granted – non performance-based options		(174	)		-
Granted – performance-based options		(203	)		-
Granted – non-employee Directors grant		-			(14	)
Restricted stock awards granted*		(510	)		-
Share-based awards canceled/forfeited		993			9
Balance at August 31, 2014		3,222			102

* Under the Company’s option plan, for each restricted stock award granted/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 fiscal 2014, employees purchased 74,889 shares as compared to 75,281 shares in fiscal 2013 and 85,487 shares in fiscal 2012. At August 31, 2014, 44,881 shares were reserved for future issuance under the Purchase Plan. On October 23, 2014, FactSet’s Board of Directors approved an amendment to increase the maximum number of shares available for purchase under the Purchase Plan to 1,000,000 shares. Approval of the amendment to the Purchase Plan is subject to approval by stockholders of FactSet at the Company’s annual meeting scheduled to be held on December 16, 2014.

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 $7.7 million, $7.5 million, and $6.7 million in matching contributions to employee 401(k) accounts during fiscal 2014, 2013 and 2012, respectively.