Note 13 - Employee Stock Option and Retirement Plans

12 Months Ended

Aug. 31, 2013

Employee Stock Option And Retirement Plans [Abstract]

Employee Stock Option And Retirement Plans [Text Block]

13. 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. The majority of the options granted with performance conditions expire either seven or 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 2013, 2012 and 2011, stock options to purchase 1,674,966; 1,468,513; and 998,038 shares of common stock, respectively, at prices which ranged from $88.40 to $103.30 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, 2010		6,451		$	47.73
Granted – non performance-based		91			89.45
Granted – performance-based		892			89.39
Granted – non-employee Directors grant		15			95.05
Exercised		(1,209	)		32.08
Forfeited		(108	)		66.55
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

Stock Options Outstanding and Exercisable

The following table summarizes ranges of outstanding and exercisable options as of August 31, 2013 (in thousands, except per share data):

					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
$24.49	–	$59.36		782		1.4	$	39.96	$	48,801		759	$	40.03	$	47,293
$61.65	–	$65.67		661		2.5	$	64.44	$	25,046		379	$	65.44	$	13,992
$66.46	–	$67.41		696		3.1	$	66.47	$	24,975		495	$	66.47	$	17,749
$87.26	–	$91.06		551		8.4	$	90.08	$	6,761		142	$	88.74	$	1,935
$92.22	–	$92.55		1,591		9.2	$	92.22	$	16,111		-	$	92.22	$	-
$94.84	–	$103.30		448		8.0	$	95.28	$	3,167		150	$	94.92	$	1,113
Total Fiscal 2013				4,729		5.9	$	75.95	$	124,861		1,925	$	59.70	$	82,082

Prior Year Amounts	2012				2011
	Number of Shares		Weighted Average Exercise Price Per Share		Number of Shares		Weighted Average Exercise Price Per Share
Outstanding at fiscal year end		6,083	$	64.76		6,132	$	57.28
Exercisable at fiscal year end		2,858	$	48.44		2,643	$	38.99

The aggregate intrinsic value of in-the-money stock options exercisable at August 31, 2013 and 2012 was $82.1 million and $125.4 million, respectively. Aggregate intrinsic value represents the difference between the Company’s closing stock price of $102.35 at August 31, 2013 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 fiscal 2013, 2012 and 2011 was $99.1 million, $43.0 million, and $71.3 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, FactSet granted 734,334 performance-based employee stock options. None of these performance-based stock options granted vested because the Company did not achieve certain performance levels for both organic ASV and diluted earnings per share during the two fiscal years ended August 31, 2012. This reflected a lower performance level than previously estimated and accordingly decreased the number of options that will vest to zero, which required FactSet to reverse $1.4 million of stock-based compensation during fiscal 2012. These performance-based options were recorded as forfeitures in fiscal 2012.

November 2011 Annual Employee Performance-based Option Grant Review

In November 2011, FactSet granted 665,551 performance-based employee stock options. None of these performance-based stock options vested because the Company did not achieve certain performance levels for both organic ASV and diluted earnings per share during the two fiscal years ended August 31, 2013.These performance-based options were recorded as forfeitures in the fourth quarter of fiscal 2013.

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 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, 2014. At August 31, 2013, FactSet estimated that 20% or 202,302 of the performance-based stock options would vest which results in unamortized stock-based compensation expense of $3.6 million to be recognized over the remaining vesting period. However, a change in the actual financial performance levels achieved during fiscal 2014 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 August 31, 2013		Cumulative Catch-up Adjustment*			Average Remaining Quarterly Expense to be Recognized
0%	$	0	$	(1,192	)	$	0
20%	$	3,556	$	0		$	213
60%	$	10,668	$	2,384		$	639
100%	$	17,780	$	4,768		$	1,065

* Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 2013.

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 accelerated to achieve the first usage growth target established on the date of grant, thus the first 20% or 48,314 options vested on August 31, 2013. In addition, due to the accelerated fourth quarter growth and forecasted future usage growth, the Company estimated that the second 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 40%, which required FactSet to record a pre-tax stock-based compensation charge of $2.6 million in the fourth quarter of fiscal 2013. 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 4.0 years. 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):

Vesting Tranche	Cumulative Catch-up Adjustment**			Remaining Expense to be Recognized
First 20%*		n/a			n/a*
Second 20%	$	(361	)	$	0
Third 20%	$	448		$	2,391
Fourth 20%	$	848		$	3,591
Fifth 20%	$	1,358		$	4,681

* The first 20% of the grant vested during fiscal 2013, and as such, there is no remaining expense to be recognized as of August 31, 2013.

** Amounts represent the cumulative catch-up adjustment to be recorded if there was a change in the vesting percentage as of August 31, 2013.

Market Metrics Performance-based Option Grant

In connection with the acquisition of the Market Metrics business in June 2010, the Company granted 746,415 performance-based stock options, which would vest only if accelerated stretch revenue targets were achieved related to the Market Metrics business and option holders remain employed by us. These options vested in the second quarter of fiscal 2013 when the Market Metrics business accelerated to achieve the stretch revenue growth targets established on the date of grant, resulting in a pre-tax stock-based compensation charge of $15.7 million. The pre-tax stock-based compensation charge of $15.7 million, recorded in the second quarter of fiscal 2013, was equal to the grant-date fair value of the stock options awarded at the time of the acquisition and represented a cumulative adjustment from a change in the vesting based on achieving the accelerated revenue targets. At August 31, 2013, none of these performance-based stock options remain unvested.

Other Performance-based Option Grants

FactSet granted 229,635 performance-based employee stock options between January 2011 and July 2011 that vest based on achieving certain ASV targets. Of this total, 133,958 vested during fiscal 2012, 53,285 vested during fiscal 2013 and 9,301 were forfeited due to employee terminations. At August 31, 2013, the Company estimates that 7,964 of these performance-based stock options will vest based on forecasted ASV growth, resulting in unamortized stock-based compensation expense of $0.1 million to be recognized over the remaining vesting period. The remaining 25,127 performance-based stock options outstanding are expected to be forfeited.

Restricted Stock and 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, 2010		261		$	61.65
Granted (restricted stock and stock units)		154		$	87.55
Vested		-		$	-
Canceled/forfeited		(8	)	$	69.41
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

* Between June 2010 and July 2011, FactSet granted 21,102 restricted stock units which entitled the holder to shares of common stock as the awards vest. A restricted stock unit is a promise to deliver shares to the employee at a future date if certain vesting conditions are met. These restricted stock units are performance-based and cliff vest 25% when certain ASV targets are met. Of the total 21,102 units granted, 14,258 units vested during the fourth quarter of fiscal 2012 because FactSet achieved three of the four ASV growth targets.

**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 at a price of $63.09. These restricted stock awards 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.

April 2013 Employee Restricted Stock Award

In April 2013, the Company granted 131,702 restricted stock units with a fair value of $85.80, which entitle the holder to shares of common stock as the awards vest over time. The Company’s restricted stock units cliff vest 20% annually upon each anniversary date of the grant. As of August 31, 2013, unamortized stock-based compensation expense of $10.4 million is to be amortized ratably to compensation expense over the remaining vesting period of 4.6 years.

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, 2010		2,216			162
Amendment to the 2004 Stock Option and Award Plan to increase the number of shares available for issuance**		4,000			-
Granted – non performance-based options		(91	)		-
Granted – performance-based options		(892	)		-
Granted – non-employee Directors grant		-			(15	)
Restricted stock awards granted*		(386	)		-
Share-based awards canceled/forfeited		130			-
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

* 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.

** As of November 30, 2010, 1.0 million shares remained available for future grant of share-based awards under the Company’s 2004 Stock Option and Award Plan, a number that the Company believed to be insufficient to meet its anticipated needs over the next 12 to 18 months. Therefore, the Company’s Board of Directors approved an amendment to increase the maximum number of shares of FactSet common stock issuable under the 2004 Stock Option and Award Plan by 4,000,000 shares. The stockholders of FactSet approved the Amended and Restated FactSet Research Systems Inc. 2004 Stock Option and Award Plan at the Company’s annual meeting held on December 14, 2010, including the reservation of an additional 4,000,000 shares of common stock for issuance.

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 2013, employees purchased 75,281 shares as compared to 85,487 shares in fiscal 2012 and 75,718 shares in fiscal 2011. At August 31, 2013, 119,770 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 $7.5 million, $6.7 million, and $5.9 million in matching contributions to employee 401(k) accounts during fiscal 2013, 2012 and 2011, respectively.