Stock-Based Compensation

9 Months Ended

May 31, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 4. Stock-Based Compensation

     The Company recognizes stock-based compensation expense, reduced for estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting period for outstanding stock awards. The Company recorded $20.1 million and $59.9 million of stock-based compensation expense gross of tax effects, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2011, respectively. The Company recorded tax effects related to the stock-based compensation expense of $0.8 million and $1.6 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2011, respectively. Included in the compensation expense recognized by the Company are $0.9 million and $2.9 million related to the Company’s employee stock purchase plan (“ESPP”) during the three months and nine months ended May 31, 2011, respectively. The Company recorded $27.5 million and $68.0 million of gross stock-based compensation expense, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2010, respectively. The Company recorded tax effects related to the stock-based compensation expense of $0.7 million and $1.3 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2010, respectively. Included in the compensation expense recognized by the Company are $0.8 million and $3.0 million related to the Company’s ESPP during the three months and nine months ended May 31, 2010, respectively. The Company capitalizes stock-based compensation costs related to awards granted to employees whose compensation costs are directly attributable to the cost of inventory. At May 31, 2011 and August 31, 2010, $0.3 million and $0.2 million, respectively, of stock-based compensation costs were classified as inventories on the Condensed Consolidated Balance Sheets.

     Cash received from exercises under all share-based payment arrangements, including the Company’s ESPP, for the nine months ended May 31, 2011 and 2010 was $17.8 million and $6.2 million, respectively. The proceeds for the nine months ended May 31, 2011 and 2010 were offset by $9.7 million and $5.5 million, respectively, of restricted shares withheld by the Company to satisfy the minimum amount of its income tax withholding requirements. The market value of the restricted shares withheld was determined on the date that the restricted shares vested and resulted in the withholding of 680,224 shares and 350,747 shares of the Company’s common stock during the nine months ended May 31, 2011 and 2010, respectively. The shares have been classified as treasury stock on the Condensed Consolidated Balance Sheets. The Company currently expects to satisfy share-based awards with registered shares available to be issued.

     A new stock award and incentive plan (the “2011 Plan”) was adopted by the Board of Directors during the first quarter of fiscal year 2011 and approved by the stockholders during the second quarter of fiscal year 2011. The 2011 Plan provides for the granting of restricted stock awards, restricted stock unit awards and other stock-based awards. The maximum aggregate number of shares that may be subject to awards under the 2011 Plan is 8,850,000. If any portion of an outstanding award that was granted under the 2002 Stock Incentive Plan (the “2002 Plan”), which was terminated immediately upon the effectiveness of the 2011 Plan, for any reason expires or is terminated or canceled or forfeited on or after the date of termination of the 2002 Plan, the shares allocable to the expired, terminated, canceled, or forfeited portion of such 2002 Plan award shall be available for issuance under the 2011 Plan.

     The current ESPP was adopted by the Company’s Board of Directors during the first quarter of fiscal year 2002 and approved by the shareholders during the second quarter of fiscal year 2002. Initially there were 2,000,000 shares reserved under the current ESPP. An additional 2,000,000 shares and 3,000,000 shares were authorized for issuance under the current ESPP and approved by stockholders during the second quarter of fiscal years 2006 and 2009, respectively. A new ESPP was adopted by the Company’s Board of Directors during the first quarter of fiscal year 2011 and approved by the shareholders during the second quarter of fiscal year 2011 with 6,000,000 shares authorized for issuance. The new ESPP will begin issuing shares after the purchase period ending June 30, 2011. The Company also adopted a tax advantaged sub-plan under the ESPP for its Indian employees. Shares are issued under the Indian sub-plan from the authorized shares under the ESPP.

a. Stock Option and Stock Appreciation Right Plans

     The Company applies a lattice valuation model for stock options and stock appreciation rights granted (collectively known as “Options”), excluding those granted under the ESPP. The lattice valuation model is a more flexible analysis to value employee Options, as compared to a Black-Scholes model, because of its ability to incorporate inputs that change over time, such as volatility and interest rates, and to allow for actual exercise behavior of Option holders.

     There were no options granted during the nine months ended May 31, 2011. The weighted-average grant-date fair value per share of Options granted during the nine months ended May 31, 2010 was $6.36. The total intrinsic value of Options exercised during the nine months ended May 31, 2011 and 2010 was $4.8 million and $0.3 million, respectively. As of May 31, 2011, there was $1.8 million of unrecognized compensation costs related to non-vested Options that is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of Options vested during the nine months ended May 31, 2011 and 2010 was $6.2 million and $14.0 million, respectively.

     Following are the grant date weighted-average and range assumptions, where applicable, used for each respective period:

	Three months ended				Nine months ended
	May 31,		May 31,		May 31,		May 31,
	2011		2010		2011		2010
Expected dividend yield		*		*		*		1.9	%
Risk-free interest rate		*		*		*	0.1% to 3.4%
Weighted-average expected volatility		*		*		*		60.2	%
Weighted-average expected life		*		*		*	5.6 years

* The Company did not grant Options during the three months ended May 31, 2011 and 2010 and the nine months ended May 31, 2011.

     The following table summarizes Option activity from August 31, 2010 through May 31, 2011:

										Weighted-
								Weighted-		Average
	Shares					Aggregate		Average		Remaining
	Available			Options		Intrinsic Value		Exercise		Contractual
	for Grant			Outstanding		(in thousands)		Price		Life (years)
Balance at August 31, 2010		10,480,001			13,154,272	$	95	$	24.10		4.09
Shares no longer available for grant due to terminated 2002 Stock Plan		(5,896,748	)		—
Options authorized		8,850,000			—
Options expired		(817,611	)		—			$	31.70
Options granted		—			—

											Weighted-
									Weighted-		Average
	Shares						Aggregate		Average		Remaining
	Available			Options			Intrinsic Value		Exercise		Contractual
	for Grant			Outstanding			(in thousands)		Price		Life (years)
Options canceled		1,196,848			(1,196,848	)			$	25.61
Restricted stock awards(1)		(4,686,743	)		—
Options exercised		—			(868,151	)			$	14.23
Balance at May 31, 2011		9,125,747			11,089,273		$	13,512	$	24.25		3.8
Exercisable at May 31, 2011					10,816,915		$	13,052	$	24.37		3.7

⁽¹⁾ Represents the maximum number of shares that can be issued based on the achievement of certain performance criteria.

b. Restricted Stock Awards

     Certain key employees have been granted time-based, performance-based, and market-based restricted stock awards. The time-based restricted awards granted generally vest on a graded vesting schedule over three years. The performance-based restricted awards generally vest on a cliff vesting schedule over three years and provide a range of vesting possibilities from 0% to 200%, depending on the level of achievement of the specified performance condition. The market-based restricted awards have a vesting condition that is tied to the Standard and Poor’s 500 Composite Index (“S&P”).

     The stock-based compensation expense for these restricted stock awards (including restricted stock and restricted stock units) is measured at fair value on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. For restricted stock awards with performance conditions, stock-based compensation expense is originally based on the number of shares that would vest if the Company achieved 100% of the performance goal, which was the probable outcome at the grant date. Throughout the requisite service period, management monitors the probability of achievement of the performance condition. If it becomes probable, based on the Company’s performance, that more or less than the current estimate of the awarded shares will vest, an adjustment to stock-based compensation expense will be recognized as a change in accounting estimate. For restricted stock awards with market conditions, the market conditions are considered in the grant date fair value of the award using a lattice model, which utilizes multiple input variables to determine the probability of the Company achieving the specified market conditions. Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period regardless of whether the market condition is satisfied, provided that the requisite service period has been completed.

     At May 31, 2011, there was $82.9 million of total unrecognized stock-based compensation expense related to restricted stock awards granted under the 2002 Plan and 2011 Plan. This expense is expected to be recognized over a weighted-average period of 1.5 years.

     The following table summarizes restricted stock activity from August 31, 2010 through May 31, 2011:

				Weighted -
				Average
				Grant-Date
	Shares			Fair Value
Non-vested balance at August 31, 2010		12,189,271		$	13.13
Changes during the period
Shares granted(1)		6,160,013		$	14.27
Shares vested		(2,678,115	)	$	16.98
Shares forfeited		(1,473,270	)	$	13.05
Non-vested balance at May 31, 2011		14,197,899		$	12.91

⁽¹⁾ Represents the maximum number of shares that can vest based on the achievement of certain performance criteria.

c. Employee Stock Purchase Plan

     Employees are eligible to participate in the ESPP after 90 days of employment with the Company. The ESPP permits eligible employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation, as defined in the ESPP, at a price equal to 85% of the fair value of the common stock at the beginning or end of the offering period, whichever is lower. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code.

     The maximum number of shares that a participant may purchase in an offering period is determined in June and December. As such, there were 506,250 and 740,720 shares purchased under the ESPP during the nine months ended May 31, 2011 and 2010, respectively. At May 31, 2011, a total of 6,297,969 shares had been issued under the ESPP.

     The fair value of shares issued under the ESPP was estimated on the commencement date of each offering period using the Black-Scholes option pricing model. The following weighted-average assumptions were used in the model for each respective period:

	Three months ended						Nine months ended
	May 31,			May 31,			May 31,			May 31,
	2011			2010			2011			2010
Expected dividend yield		1.1	%		0.8	%		1.1	%		0.8	%
Risk-free interest rate		0.2	%		0.2	%		0.2	%		0.2	%
Weighted-average expected volatility		49.7	%		49.0	%		49.7	%		49.0	%
Expected life	.5 years			.5 years			.5 years			.5 years