EMPLOYEE STOCK PLANS (Tables)

9 Months Ended

Jun. 29, 2012

Share-Based Compensation Expense

The table below summarizes the share-based compensation expense recognized under ASC 718, “Compensation – Stock Compensation,” for stock awards under the Third Amended 2005 Plan (before and after its February 2012 amendment and restatement) and for the option component of the employee stock purchase plan shares:

	Three Months Ended						Nine Months Ended
(In thousands, except per share amounts)	June 29, 2012			July 1, 2011			June 29, 2012			July 1, 2011
Cost of revenues—Product	$	1,107		$	1,055		$	3,351		$	3,013
Cost of revenues—Service contracts and other		317			392			1,184			1,610
Research and development		1,574			1,174			4,833			4,485
Selling, general and administrative		8,518			6,186			27,287			25,803
Taxes on earnings		(3,728	)		(2,942	)		(11,776	)		(11,827	)
Net decrease in net earnings	$	7,788		$	5,865		$	24,879		$	23,084
Increase (decrease) on:
Cash flows from operating activities (1)	$	(1,661	)	$	(4,282	)	$	(7,805	)	$	(21,768	)
Cash flows from financing activities (1)	$	1,661		$	4,282		$	7,805		$	21,768

(1) Amounts represent excess tax benefits from share-based compensation.

Fair Value Of Employee Stock Option Plans With Weighted Average Assumptions

The fair value of options granted was estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Three Months Ended						Nine Months Ended
	June 29, 2012			July 1, 2011			June 29, 2012			July 1, 2011
Employee Stock Option Plans
Expected term (in years)		4.55			5.19			4.64			4.75
Risk-free interest rate		0.7	%		1.8	%		0.8	%		2.0	%
Expected volatility		34.3	%		34.5	%		36.9	%		35.5	%
Expected dividend		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average fair value at grant date	$	19.14		$	23.23		$	18.75		$	23.26

Fair Value Of Employee Stock Purchase Plan With Weighted Average Assumptions

The option component of employee stock purchase plan shares was estimated at the date of grant using the Black-Scholes model with the following weighted average assumptions:

	Three Months Ended						Nine Months Ended
	June 29, 2012			July 1, 2011			June 29, 2012			July 1, 2011
Employee Stock Purchase Plan
Expected term (in years)		0.50			0.50			0.50			0.50
Risk-free interest rate		0.1	%		0.1	%		0.1	%		0.2	%
Expected volatility		18.0	%		12.6	%		20.6	%		11.9	%
Expected dividend		0.0	%		0.0	%		0.0	%		0.0	%
Weighted average fair value at grant date	$	12.16		$	13.09		$	12.38		$	11.91

Activity Under Employee Stock Plans

Activity under the Company’s employee stock plans is presented below:

				Options Outstanding
(In thousands, except per share amounts)	Shares Available for Grant			Number of Shares			Weighted Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (3)
Balance at September 30, 2011		8,424			6,917		$	45.90
Authorized		6,000			0			0.00
Granted (1)		(2,673	)		742			58.50
Cancelled or expired (2)		111			(29	)		55.69
Exercised		0			(1,015	)		40.60
Balance at June 29, 2012		11,862			6,615		$	48.08		3.8	$	84,621
Exercisable at June 29, 2012					5,604		$	46.56		3.4	$	80,142

(1) The difference between the number of shares granted listed in the column headed “Shares Available for Grant” and the number of shares granted listed in the column headed “Options Outstanding—Number of Shares” represents the awards of deferred stock units, restricted stock units and performance units. Deferred stock unit, restricted stock unit and performance unit awards were counted against the shares available for grant limit as 2.5 shares for every one awarded before February 9, 2012 and were counted against the shares available for grant limit as 2.6 shares for every one awarded on or after February 9, 2012. In addition, the shares available for grant limit was further adjusted to reflect a maximum payout of 1.5 shares that could be issued for each performance unit granted.

(2) The difference between the number of cancelled or expired shares listed in the column headed “Shares Available for Grant” and the number of cancelled or expired shares listed in the column headed “Options Outstanding—Number of Shares” represents the cancellation of shares of restricted common stock and restricted stock units due to employee terminations.

(3) The aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the exercise price and the closing price of VMS common stock of $60.77 as of June 29, 2012, the last trading date of the third quarter of fiscal year 2012, and which would have been received by the option holders had all option holders exercised and sold their options as of that date.

Activity For Restricted Stock, Restricted Stock Units, Deferred Stock Units And Performance Units

The activity for restricted stock, restricted stock units, deferred stock units and performance units is summarized as follows:

(In thousands, except per share amounts)	Shares			Weighted Average Grant-Date Fair Value
Balance at September 30, 2011		735		$	47.36
Granted		713			59.06
Vested		(397	)		45.14
Cancelled or expired		(33	)		53.49
Balance at June 29, 2012		1,018		$	56.23