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Management Common Stock Loan Program | 12 Months Ended
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Aug. 31, 2013
Management Common Stock Loan Program [Abstract] |
Management Common Stock Loan Program | 11. MANAGEMENT COMMON STOCK LOAN PROGRAM During fiscal 2000, certain of our management personnel borrowed funds from an external lender, on a full-recourse basis, to acquire shares of our common stock. The loan program closed during fiscal 2001 with 3.825 million shares of common stock purchased by the loan participants for a total cost of $33.6 million, which was the market value of the shares acquired and distributed to loan participants. The Company initially participated on these management common stock loans as a guarantor to the lending institution. However, in connection with a new credit facility obtained during fiscal 2001, we acquired the loans from the external lender at fair value and became the creditor for these loans. The loans in the management stock loan program initially accrued interest at 9.4 percent, were full-recourse to the participants, and were originally due in March 2005. Although interest accrued on the participants’ outstanding balance over the life of the loans, the Company ceased recording interest income from these loans in fiscal 2002. In May 2004, our Board of Directors approved modifications to the terms of the management stock loans. The Company chose to forego certain of its rights under the terms of the loans and granted participants the modifications to improve their ability to pay, and the Company’s ability to collect, the outstanding balances of the loans. These modifications applied to all current and former employees whose loans did not fall under the provisions of the Sarbanes-Oxley Act of 2002. Loans to our officers and directors were not affected by the approved modifications and loans held by those persons, which totaled $0.8 million, were repaid on the original due date of March 30, 2005. The fiscal 2004 modifications waived the Company’s right to collect the outstanding balance of the loans for three years or until the closing price of the Company’s stock multiplied by the number of shares held by participants equaled the outstanding principal and accrued interest on the loans (the Breakeven Date), lowered the effective interest rate, allowed participants to repay the loans with shares of common stock, and waived the prepayment penalty. Prior to the May 2004 modifications, we accounted for the loans and the corresponding shares using a loan-based accounting model and periodically reduced the carrying value of the loans as determined by the loan loss methodology. However, due to the nature of the May 2004 modifications, we reevaluated the accounting for the management stock loan program. Based upon relevant accounting guidance, we determined that the management common stock loans should be accounted for as non-recourse stock compensation instruments. As a result of this determination, the remaining carrying value of the notes and interest receivable, which totaled $7.6 million prior to the modifications, was reduced to zero with a corresponding reduction in additional paid-in capital. This accounting treatment also precluded the Company from recovering amounts previously expensed as loan loss reserves in prior periods. During fiscal 2006, the Company offered participants in the management common stock loan program the opportunity to formally modify the terms of their loans in exchange for placing their shares of common stock in an escrow account that allowed the Company to have a security interest in the loan program shares. The key modifications to the management common stock loans for the participants accepting the fiscal 2006 modification offer were as follows: Modification of Promissory Note – The management stock loan due date was changed to be the earlier of (a) March 30, 2013, or (b) the Breakeven Date. The interest rate on the loans was also slightly increased. Redemption of Management Loan Program Shares – The Company was granted the right to redeem the shares held in escrow on the Breakeven Date or the due date as full or partial satisfaction of the promissory notes. The fiscal 2006 modifications gave the Company a measure of control over the outstanding loan program shares to facilitate payment of the loans should the market value of our common stock equal the principal and accrued interest on the management stock loans. At the closing date of the extension offer, management stock loan participants holding approximately 3.5 million shares, or 94 percent of the remaining loan shares, elected to accept the extension offer and placed their management stock loan shares into the escrow account. Based on the fiscal 2006 modifications, we reevaluated the accounting treatment regarding the loan shares and their inclusion in Basic EPS. Since the management stock loan shares held in the escrow account continued to have the same income participation rights as other common shareholders, we determined that the escrowed loan shares were participating securities. As a result of this determination, the management loan shares were included in the calculation of basic EPS in periods of net income and excluded from basic EPS in periods of net loss while outstanding. During the second quarter of fiscal 2013, the common share price required to trigger the Breakeven Date redemptions was achieved for participants that accepted the fiscal 2006 modifications. Accordingly, we transferred 3.3 million shares of common stock held by the management loan participants in escrow to our transfer agent as full payment on the loans. These shares were valued at the closing price of our common stock on the Breakeven Date and were added to treasury stock with a corresponding increase to additional paid-in capital. In connection with the repayment of the management stock loans, the Company recorded $0.5 million of share-based compensation expense for the value of the shares retained by loan participants that was in excess of the breakeven price. The Company is currently in the process of collecting amounts due from participants that declined to accept the fiscal 2006 modification terms. One of our executive officers was a participant in our management stock loan program, and owed the Company $1,126,595 (for 75,865 shares) at November 30, 2010. To settle the loan, he surrendered his loan shares (valued at market) to the Company in partial payment of the loan and we forgave the remaining loan balance. During the fourth quarter of fiscal 2012 we acquired 31,063 shares of our common stock from management stock loan participants who declared bankruptcy (unrelated to the management stock loan program). These shares were released to us by the bankruptcy court and were valued at the closing price of the Company’s common stock on the date received into treasury by our transfer agent.

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