Employee Benefit Plans
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Dec. 31, 2011
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Employee Benefit Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Note 12. Employee Benefit Plans A. Stock Plans. The Company recognizes stock-based compensation expense in net earnings based on the fair value of the award on the date of grant. Stock-based compensation consists of the following:
· Employee Stock Purchase Plan. The Company offers an employee stock purchase plan that allows eligible employees to purchase shares of common stock at a price equal to 95% of the market value for the Company's common stock on the last day of the offering period. This plan has been deemed non-compensatory and therefore, no compensation expense has been recorded. · Restricted Stock. o Time-Based Restricted Stock. The Company has issued time-based restricted stock to certain key employees. These shares are restricted as to transfer and in certain circumstances must be returned to the Company at the original purchase price. The Company records stock compensation expense relating to the issuance of restricted stock based on market prices on the date of grant on a straight-line basis over the period in which the transfer restrictions exist, which is up to five years from the date of grant. o Performance-Based Restricted Stock. The performance-based restricted stock program has a one-year performance period, and a subsequent six-month service period. Under this program, the Company communicates "target awards" to employees at the beginning of the performance period and, as such, dividends are not paid in respect of the "target awards" during the performance period. After the performance period, if the performance targets are achieved, associates are eligible to receive dividends on shares awarded under the program. The performance target is based on earnings per share growth over the performance period, with possible payouts ranging from 0% to 150% of the "target awards." Stock-based compensation expense is measured based upon the fair value of the award on the grant date. Compensation expense is recognized on a straight-line basis over the vesting period of approximately 18 months, based upon the probability that the performance target will be met. The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan and restricted stock awards. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase programs. The Company repurchased 0.9 million shares in the three months ended December 31, 2011 as compared to 1.1 million shares repurchased in the three months ended December 31, 2010 and the Company repurchased 6.2 million shares in the six months ended December 31, 2011 as compared to 2.4 million shares repurchased in the six months ended December 31, 2010. The Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions. Stock-based compensation expense of $27.2 million and $22.8 million was recognized in earnings for the three months ended December 31, 2011 and 2010, respectively, as well as related tax benefits of $10.0 million and $8.5 million, respectively. Stock-based compensation expense of $45.7 million and $36.7 million was recognized in earnings for the six months ended December 31, 2011 and 2010, respectively, as well as related tax benefits of $16.8 million and $13.7 million, respectively.
As of December 31, 2011, the total remaining unrecognized compensation cost related to non-vested stock options and restricted stock awards amounted to $5.4 million and $70.3 million, respectively, which will be amortized over the weighted-average remaining requisite service periods of 1.3 years and 1.3 years, respectively. During the six months ended December 31, 2011, the following activity occurred under the Company's existing plans: Stock Options:
Performance-Based Restricted Stock:
Time-Based Restricted Stock:
The fair value of each stock option issued is estimated on the date of grant using a binomial option pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee exercise behavior. Expected volatilities utilized in the binomial model are based on a combination of implied market volatilities, historical volatility of the Company's stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial model also incorporates exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grant is derived from the output of the binomial model and represents the period of time that options granted are expected to be outstanding. The fair value for stock options granted was estimated at the date of grant using the following assumptions:
B. Pension Plans The components of net pension expense were as follows:
During the six months ended December 31, 2011, the Company contributed $79.2 million to the pension plans and expects to contribute approximately $4.8 million during the remainder of the fiscal year ended June 30, 2012. |