Share-based Awards

3 Months Ended

May. 31, 2015

Share-based Awards

NOTE 8—Share-based Awards

The Company measures share-based compensation cost at the grant date, based on the estimated fair value of the award and recognizes the cost over the employee requisite service period, typically on a straight-line basis, net of estimated forfeitures. The Company estimates the fair value of stock options using the Black-Scholes-Merton valuation model. The fair value of nonvested share awards, nonvested share units and performance share units are measured at their underlying closing share price on the day of grant.

The following summarizes share-based compensation expense recognized in the Company’s Consolidated Financial Statements for the three months ended May 31, 2015 and May 31, 2014 (in thousands):

	Three Months Ended
	May 31, 2015		May 31, 2014
Cost of revenue	$	3,727	$	3,118
Sales and marketing		15,412		10,238
Research and development		10,874		8,864
General and administrative		6,509		6,494
Total share-based compensation	$	36,522	$	28,714

Share-based compensation expense qualifying for capitalization was insignificant for each of the three months ended May 31, 2015 and May 31, 2014. Accordingly, no share-based compensation expense was capitalized during the three months ended May 31, 2015 and May 31, 2014.

Estimated annual forfeitures—An estimated forfeiture rate of 10.0% per annum, which approximates the Company’s historical rate, was applied to options and nonvested share units. Awards are adjusted to actual forfeiture rates at vesting. The Company reassesses its estimated forfeiture rate annually or when new information, including actual forfeitures, indicate a change is appropriate.

During the three months ended May 31, 2015, the Company granted the following share-based awards:

	Three Months Ended May 31, 2015
	Shares  and Shares Underlying Awards		Weighted Average Per Share Fair Value
Service-based shares and share units		807,596	$	74.81
Performance share units—target (1)		258,118	$	77.28
Performance share awards (2)		98,525	$	77.28
Total awards		1,164,239	$	75.57

(1) Certain executives and senior management were awarded a target number of performance share units (“PSUs”). PSU grantees may earn up to 200% of the target number of PSUs. Half of the target number of PSUs can be earned by the grantees depending upon the Company’s financial performance measured against the financial performance of specified peer companies during a three-year performance period beginning on March 1, 2015. The remaining target number of PSUs can be earned by the grantees depending upon the Company’s total shareholder return performance measured against the total shareholder return of specified peer companies during a three-year period beginning on March 1, 2015.

(2) Certain executives were granted restricted stock awards. These shares were awarded subject to the achievement of a specified dollar amount of revenue for FY2016 (the “RSA Performance Goal”). If the Company fails to achieve the RSA Performance Goal for FY2016, then all such shares are forfeited. If the Company achieves the RSA Performance Goal for FY2016, then 25% of the restricted stock vests on July 16, 2016 (or, if that date is not a trading day, on the first trading day following that date), and the remainder vests ratably on a quarterly basis over the course of the subsequent three–year period, provided that the grantee’s business relationship with the Company has not ceased.