Stock Benefit Plans and Stock-Based Compensation

6 Months Ended

May 31, 2011

Stock Benefit Plans and Stock-Based Compensation

Stock Benefit Plans and Stock-Based Compensation

11. STOCK BENEFIT PLANS AND STOCK-BASED COMPENSATION

Stock Benefit Plans

2008 Equity Incentive Plan (the "2008 Plan"). As of May 31, 2011, there were 6.0 million shares available for grant and approximately 4.2 million shares underlying stock options outstanding under the 2008 Plan.

As of May 31, 2011, there were approximately 4.4 million performance-based restricted stock units ("PRSUs") outstanding.

1996 Stock Option Plan (the "1996 Plan"). As May 31, 2011, there were no shares available for grant and approximately 14.8 million shares underlying stock options outstanding under the 1996 Plan.

As of May 31, 2011, there were 3.9 million shares of restricted stock and 1.5 million shares underlying restricted stock units outstanding under the 2008 Plan and 1996 Plan, combined.

Insightful Corporation Amended and Restated 2001 Stock Option and Incentive Plan (the "Insightful Plan"). As of May 31, 2011, there were no shares available for grant and approximately 34,000 shares underlying stock options outstanding under the Insightful Plan.

1998 Director Option Plan (the "Director Plan"). As of May 31, 2011, there were no shares available for grant and approximately 1.0 million shares underlying stock options outstanding under the Director Plan.

2008 Employee Stock Purchase Plan (the "2008 ESPP"). We issued approximately 0.2 million shares under the 2008 ESPP, representing approximately $1.8 million in employee contributions, for the six months ended May 31, 2011. As of May 31, 2011, approximately 8.9 million shares of our common stock were available for issuance under the 2008 ESPP.

2009 Deferred Compensation Plan (the "2009 DCP"). As of May 31, 2011, there were approximately 987,000 shares of our common stock available for issuance under the 2009 DCP.

Stock Options Activities

The summary of stock option activity for the six months ended May 31, 2011 is presented below (in thousands, except per share and term data):

Stock Options	Number of Shares Underlying Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at November 30, 2010		22,173		$	8.36		3.23	$	250,651
Granted		1,784			27.79
Exercised		(3,742	)		8.41
Forfeited or expired		(140	)		16.85
Outstanding at May 31, 2011		20,075		$	10.02		3.18	$	368,834
Vested and expected to vest at May 31, 2011		19,387		$	9.66		3.07	$	362,912
Exercisable at May 31, 2011		15,911		$	8.18		2.49	$	320,326

The intrinsic value of exercised stock options is calculated based on the difference between the exercise price and the quoted closing market price of our common stock as of the exercise date. The total intrinsic value of stock options exercised in the six months ended May 31, 2011 and 2010 was $63.1 million and $10.0 million, respectively. Upon the exercise of stock options, we issue common stock from our authorized shares. As of May 31, 2011, total unamortized stock-based compensation cost related to unvested stock options was $21.0 million, with a weighted-average remaining recognition period of 2.74 years.

The total realized tax benefits attributable to stock options exercised and vesting of stock awards were $10.7 million and $13.7 million for the six months ended May 31, 2011 and 2010, respectively.

Stock Awards Activities

Our nonvested stock awards are comprised of restricted stock, restricted stock units and performance-based restricted stock units. A summary of the status of nonvested stock awards as of May 31, 2011, and activities during the six months ended May 31, 2011, is presented as follows (in thousands, except per share data):

Nonvested Stock Awards	Restricted Stock			Restricted Stock Units			Performance- based Restricted Stock Units		Total Number of Shares Underlying Stock Awards			Weighted- Average Grant Date Fair Value
Nonvested at November 30, 2010		4,314			1,659			4,092		10,065		$	9.47
Granted		1,121			357			274		1,752			26.71
Vested		(1,379	)		(467	)		—		(1,846	)		8.23
Forfeited		(134	)		(22	)		—		(156	)		13.01
Nonvested at May 31, 2011		3,922			1,527			4,366		9,815		$	12.63

We granted approximately 1.5 million shares of nonvested stock awards at no cost to recipients during the six months ended May 31, 2011. As of May 31, 2011 there was $59.9 million of total unrecognized compensation cost related to nonvested stock awards. That cost is expected to be recognized generally on a straight-line basis as the shares vest over three to four years (the weighted-average remaining recognition period is 2.6 years). The total fair value of shares vested pursuant to stock awards during the six months ended May 31, 2011 is $15.2 million.

We granted approximately 0.3 million PRSUs during the six months ended May 31, 2011. As of May 31, 2011, there was $28.1 million of total unrecognized compensation cost related to all of our outstanding PRSUs. That cost is expected to be recognized using the graded vesting attribution method over the requisite service period of four to five years (the weighted-average remaining recognition period is approximately 3.11 years as of May 31, 2011).

Stock-Based Compensation

Stock-based compensation cost for the three months ended May 31, 2011 and 2010 was $11.8 million and $7.8 million, respectively. Stock-based compensation cost for the six months ended May 31, 2011 and 2010 was $23.3 million and $14.2 million, respectively. The stock-based compensation cost primarily relates to expenses recognized from nonvested stock awards and employee stock options. The deferred tax benefit on stock-based compensation expenses for the three months ended May 31, 2011 and 2010 was $3.9 million and $2.7 million, respectively. The deferred tax benefit on stock-based compensation expenses for the six months ended May 31, 2011 and 2010 was $7.9 million and $4.7 million, respectively.

We recognize the fair value of service-based stock awards generally on a straight-line basis over the requisite service period of three to four years, net of estimated forfeitures. Employee stock-based compensation cost related to grants of service-based stock awards for the three months ended May 31, 2011 and 2010 was approximately $5.9 million and $4.0 million, respectively. Employee stock-based compensation cost related to grants of service-based stock awards for the six months ended May 31, 2011 and 2010 was approximately $11.3 million and $8.0 million, respectively.

We recognize the fair value of employee stock options on a straight-line basis over the requisite service period of three to four years, net of estimated forfeitures. Employee stock-based compensation cost related to employee stock options for the three months ended May 31, 2011 and 2010 was approximately $2.6 million and $2.2 million, respectively. Employee stock-based compensation cost related to employee stock options for the six months ended May 31, 2011 and 2010 was approximately $4.6 million and $4.4 million, respectively.

We recognize compensation cost related to the performance-based restricted stock units, net of estimated forfeitures, over the requisite service period of four to five years, using the graded vesting attribution method. Employee stock-based compensation cost related to PRSUs for the three months ended May 31, 2011 and 2010 was $3.0 million and $1.3 million, respectively. Employee stock-based compensation cost related to PRSUs for the six months ended May 31, 2011 and 2010 was $6.8 million and $1.3 million, respectively.

We recognize the stock-based compensation costs for PRSUs when we believe it is probable that we will achieve the performance criteria as defined in the PRSU agreement. We then estimate the most probable period in which the performance criteria will be met, if at all. Under the terms of the PRSUs granted in fiscal year 2010, 20% of those PRSUs will be forfeited if, in the fiscal year following achievement of the applicable performance goals, our non-GAAP EPS falls by 10% or more as compared to the non-GAAP EPS achieved for the year that the performance goals were achieved. Therefore, we also assess the probability of this forfeiture when analyzing our stock-based compensation costs for such PRSUs. On a quarterly basis management calculates, based on these estimates, the appropriate compensation expense over the requisite service period by using the graded vesting attribution method and then book an adjustment to compensation cost in that reporting period. As of May 31, 2011, management estimates that it is probable that the performance criteria will be met in the fourth quarter of 2012 and it is not probable that 20% of these PRSUs will be forfeited prior to vesting. In the first quarter of fiscal year 2011, we granted 0.3 million PRSUs which are subject to different performance criteria than the PRSUs granted in fiscal year 2010. As of May 31, 2011, management estimates that it is probable that the performance criteria of the PRSUs granted in the first quarter of fiscal year 2011 will be met in fiscal year 2011.

We recognized stock-based compensation costs associated with our employee stock purchase programs on a straight-line basis over each six-month offering period. Employee stock-based compensation associated with our employee stock purchase programs for the six months ended May 31, 2011 and 2010 was approximately $0.6 million and $0.5 million, respectively.

Assumptions for Estimating Fair Value of Stock-Based Awards

We selected the Black-Scholes option pricing model as the most appropriate model for determining the estimated fair value for stock-based awards. The following table summarizes the assumptions used to value stock options granted in the respective periods:

	Three Months Ended May 31,						Six Months Ended May 31,
	2011			2010			2011			2010
Stock Option Grants:
Expected term of stock options (years)		5.1			5.1			4.8 – 5.1			4.8 – 5.1
Risk-free interest rate		2.00	%		2.40	%		2.00 – 2.10	%		2.40	%
Expected volatility		42	%		42	%		42	%		42 - 44	%
Weighted-average grant date fair value (per share)	$	11.61		$	4.79		$	11.11		$	4.49
ESPP:
Expected term of ESPP (years)		N/A			N/A			0.5			0.5
Risk-free interest rate		N/A			N/A			0.20	%		0.20	%
Expected volatility		N/A			N/A			38	%		35	%
Weighted-average grant date fair value (per share)		N/A			N/A		$	6.17		$	2.30