Share-Based Compensation

The Company’s 1993 Stock Incentive Plan, as amended, (“the Plan”) was established for its employees, consultants and directors. There are 12.2 million shares of Class A common stock reserved for issuance under the Plan, of which 6.5 million are available for future grants as of August 31, 2011. Share-based compensation expense was $14 million, $11 million and $9 million for the years ended August 31, 2011, 2010 and 2009, respectively. Tax benefits used for option exercises and vesting of restricted stock units were not material for all periods presented.

Restricted Stock Units

The Plan provides for the issuance of RSUs. The estimated fair value of the RSUs is based on the market closing price of the underlying Class A common stock on the date of grant. The compensation expense associated with the RSUs granted is recognized over the respective requisite service period of the awards, net of estimated forfeitures.

During the years ended August 31, 2011, 2010 and 2009, the Compensation Committee granted 135,255 RSUs, 153,986 RSUs and 106,387 RSUs, respectively, to its key employees, officers and directors under the Plan. The RSUs have a five-year term and vest 20% per year commencing June 1 of the year after grant, except for an immaterial number of awards granted with different terms. The estimated fair value of the RSUs granted during the years ended August 31, 2011, 2010 and 2009 was $7 million, $7 million and $5 million, respectively.

A summary of the Company’s restricted stock unit activity is as follows:



	Number of Shares (in thousands)	Weighted Average Grant Date Fair Value		Fair Value⁽¹⁾
Outstanding as of August 31, 2008	261	$	57.19
Granted	106	$	51.08
Vested	(80)	53.56		$	53.95
Forfeited	(26)	56.93
Outstanding as of August 31, 2009	261	$	56.20
Granted	154	$	48.83
Vested	(88)	52.45		$	46.48
Forfeited	(16)	57.37
Outstanding as of August 31, 2010	311	$	53.55
Granted	135	$	53.65
Vested	(94)	51.86		$	57.63
Forfeited	(4)	52.42
Outstanding as of August 31, 2011	348	$	54.06

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(1)	Amounts represent the value of the Company’s Class A common stock on the date that the restricted stock units vested.

The Company recognized compensation expense associated with RSUs of $7 million, $5 million and $4 million for the years ended August 31, 2011, 2010 and 2009, respectively. As of August 31, 2011, total unrecognized compensation costs related to unvested RSUs amounted to $13 million, which is expected to be recognized over a weighted average period of three years.

Performance Share Awards

The Plan authorizes performance-based awards to certain employees subject to certain conditions and restrictions. A participant generally must be employed by the Company on October 31 following the end of the performance period to receive an award payout, although adjusted awards will be paid if employment terminates earlier on account of death, disability, retirement, termination without cause after the first year of the performance period or a sale of the Company or the reporting segments for which the participant works. Awards will be paid in Class A common stock as soon as practicable after October 31 following the end of the performance period.

The Company accrues compensation cost for performance share awards based on the probable outcome of specified performance conditions, net of estimated forfeitures. The Company accrues compensation cost if it is probable that the performance conditions will be achieved. The Company reassesses whether achievement of the performance conditions are probable at each reporting date. If it is probable that the actual performance results will exceed the stated target performance conditions, the Company accrues additional compensation cost for the additional performance shares to be awarded. If, upon reassessment, it is no longer probable that the actual performance results will exceed the stated target performance conditions, or that it is no longer probable that the target performance condition will be achieved, the Company reverses any recognized compensation cost for shares no longer probable of being issued. If the performance conditions are not achieved at the end of the service period, all related compensation cost previously recognized is reversed.

Fiscal 2009 – 2011 Performance Share Awards

The Compensation Committee approved performance-based awards under the Plan with a grant date of November 24, 2008. The Compensation Committee established performance targets based on the Company’s average growth in earnings per share (weighted at 50%) and the Company’s average return on capital employed (weighted at 50%) for the three years of the performance period, with award payouts ranging from a threshold of 50% to a maximum of 200% for each portion of the target awards.

Fiscal 2010 – 2012 Performance Share Awards

The Compensation Committee approved performance-based awards under the Plan with a grant date of November 20, 2009. The Compensation Committee established performance targets based on the Company’s earnings per share (weighted at 50%) and the average return on capital employed on a divisional basis (weighted at 50%) for the three years of the performance period, with award payouts ranging from a threshold of 50% to a maximum of 200% for each portion of the target awards.

Fiscal 2011 – 2013 Performance Share Awards

The Compensation Committee approved performance-based awards under the Plan with a grant date of December 3, 2010. The Compensation Committee established performance targets based on the Company’s earnings per share (weighted at 50%) and the average return on capital employed on a divisional basis (weighted at 50%) for the three years of the performance period, with award payouts ranging from a threshold of 50% to a maximum of 200% for each portion of the awards.

A summary of the Company’s performance-based awards activity is as follows:



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value		Fair Value⁽¹⁾
Outstanding as of August 31, 2008	557		$	43.41
Granted	57		$	22.30
Vested	(153	)	34.46		$	26.93
Forfeited	(182	)	40.17
Outstanding as of August 31, 2009	279		$	44.64
Granted	125		$	46.71
Vested	(121	)	39.72		$	43.24
Forfeited	(17	)	42.77
Outstanding as of August 31, 2010	266		$	47.95
Granted	115		$	59.45
Vested	(90	)	63.82		$	52.13
Forfeited	(6	)	53.35
Outstanding as of August 31, 2011	285		$	47.48

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(1)	Amounts represent the value of the Company’s Class A common stock on the date that the performance share awards vested.

Compensation expense associated with performance-based awards was calculated using management’s current estimate of the expected level of achievement of the performance targets under the Plan. Compensation expense for anticipated awards based on the Company’s financial performance was $6 million, $3 million and less than $1 million for the years ended August 31, 2011, 2010 and 2009, respectively. As of August 31, 2011, unrecognized compensation costs related to non-vested performance shares amounted to $8 million, which is expected to be recognized over a weighted average period of 1.6 years.

Deferred Stock Units

The Deferred Compensation Plan for Non-Employee Directors (“DSU Plan”) provides for the issuance of DSUs to non-employee directors to be granted under the Plan. One DSU gives the director the right to receive one share of Class A common stock at a future date. Immediately following the annual meeting of shareholders, each non-employee director will receive DSUs which will become fully vested on the day before the next annual meeting, subject to continued service on the Board. The compensation expense associated with the DSUs granted is recognized over the respective requisite service period of the awards.

The Company will issue Class A common stock to a director pursuant to vested DSUs in a lump sum in January of the first year after the director ceases to be a director of the Company, subject to the right of the director to elect an installment payment program under the DSU Plan.

DSUs granted during the years ended August 31, 2011, 2010 and 2009 were for a total of 17,459 shares, 30,834 shares and 28,638 shares, respectively. The compensation expense associated with DSUs and the total value of shares vested during each of the years ended August 31, 2011, 2010 and 2009, as well as the unrecognized compensation expense as of August 31, 2011, were not material.

Stock Options

Under the Plan, stock options are granted to employees at exercise prices equal to the fair market value of the Company’s Class A common stock at the dates of grant at the sole discretion of the Board of Directors. Generally, stock options vest ratably over a five-year period from the date of grant and have a contractual term of ten years. The fair value of each option grant under the Plan is estimated at the date of grant using the Black-Scholes Option Pricing Model, which utilizes assumptions related to volatility, the risk-free interest rate, the dividend yield and employee exercise behavior. No options were granted in the years ended August 31, 2011, 2010 and 2009.

A summary of the Company’s stock option activity and related information is as follows:



	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)⁽¹⁾
Outstanding as of August 31, 2008	506		$	25.03	6.3	$	21,931
Exercises	(120	)	$	14.01
Forfeitures/Cancellations	(9	)	34.53
Outstanding as of August 31, 2009	377		$	28.32	5.6	$	9,683
Exercises	(36	)	$	26.08
Forfeitures/Cancellations	(3	)	34.46
Outstanding as of August 31, 2010	338		$	28.51	4.8	$	5,324
Exercises	(19	)	$	28.70
Outstanding and exercisable as of August 31, 2011	319		$	28.50	3.9	$	5,430

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(1)	Amounts represent the difference between the exercise price and the closing price of the Company’s stock on the last trading day of the corresponding fiscal year, multiplied by the number of in-the-money options.

All outstanding stock options were vested as of August 31, 2011. The aggregate intrinsic value of stock options exercised, which was $1 million, $1 million and $4 million for the years ended August 31, 2011, 2010 and 2009, respectively, represents the difference between the exercise price and the value of the Company’s stock at the time of exercise. The total fair value of stock options vested, compensation expense associated with stock options, the total proceeds received from option exercises and the tax benefits realized from options exercised were not material during each of the years ended August 31, 2011, 2010 and 2009.