Equifax 2006 Annual Report Download - page 63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EQUIFAX 2006 ANNUAL REPORT 61
The following table summarizes information about nonvested stock grants for the twelve months ended December 31,
2005 and 2004:
Shares Average
Year (In thousands) Fair Value
2005 Grants 290 $32.28
Cancellations (15) $ 29.12
2004 Grants 487 $25.86
Cancellations (7) $25.60
We expect to issue new shares of common stock or common shares held by our employee benefi ts trust upon the exer-
cise of stock options or once nonvested shares vest. We have not changed our policies related to stock-based awards, such
as the quantity or type of instruments issued, as a result of adopting SFAS 123R, nor have we changed the terms of our
stock-based awards. At December 31, 2006, there were 2.2 million shares available for future stock option grants and
nonvested stock awards.
Measurement of Fair Value.
Stock Options. We use the binomial model to calculate the fair value of stock options granted on or after January 1, 2006. The
binomial model incorporates assumptions regarding anticipated employee exercise behavior, expected stock price volatility,
dividend yield and risk-free interest rate. Anticipated employee exercise behavior and expected post-vesting cancellations
over the contractual term used in the binomial model were primarily based on historical exercise patterns. These historical
exercise patterns indicated there was not signifi cantly different exercise behavior between employee groups. For our expected
stock price volatility assumption, we weighted historical volatility and implied volatility. We used daily observations for his-
torical volatility, while our implied volatility assumption was based on actively traded options related to our common stock.
The expected term is derived from the binomial model, based on assumptions incorporated into the binomial model as
described above.
The fair value for stock options granted during the twelve months ended December 31, 2006, 2005 and 2004, was
estimated at the date of grant, using the binomial model (2006) and the Black-Scholes model (2005 and 2004), respec-
tively, with the following weighted-average assumptions:
Twelve Months Ended December 31,
2006 2005 2004
Dividend yield 0.5% 0.5% 0.5%
Expected volatility 24.0% 33.0% 36.3%
Risk-free interest rate 4.8% 3.8% 3.6%
Expected term (in years) 4.4 4.5 4.5
Weighted-average fair value of stock options granted $8.33 $9.81 $8.75
Nonvested Stock. The fair value of nonvested stock is based on the fair market value of our common stock on the date of
grant. However, since our nonvested stock does not pay dividends during the vesting period, the fair value on the date of
grant is reduced by the present value of the expected dividends over the requisite service period (discounted using the
appropriate risk-free interest rate upon the adoption of SFAS 123R).
Financial Statement Impact. Total stock-based compensation expense was $17.4 million, $8.2 million and $2.4 million, for
the twelve months ended December 31, 2006, 2005 and 2004, respectively, of which $16.1 million, $8.2 million and $2.4 mil-
lion, respectively, was included in selling, general and administrative expenses in our Consolidated Statements of Income. The
income tax benefi t related to stock-based compensation expense was $6.0 million, $3.0 million and $0.9 million for the twelve
months ended December 31, 2006, 2005 and 2004, respectively.
For the twelve months ended December 31, 2006, the incremental negative impact of adopting SFAS 123R was $7.6 mil-
lion, pretax, and $5.2 million, net of tax, with a $0.04 impact on basic and diluted EPS. The incremental impact of SFAS 123R
during the twelve months ended December 31, 2006 represents (1) the stock option expense related to stock options unvested
at the time of adoption and those granted during the twelve months ended December 31, 2006, (2) the accelerated expense
recognition for nonvested shares that were granted during the twelve months ended December 31, 2006 to employees who
are retirement eligible prior to the expiration of the stated vesting period, and (3) the impact of estimating forfeitures related
to nonvested shares.
At December 31, 2006, our total unrecognized compensation cost related to nonvested stock and stock options was
$12.2 million with a weighted-average recognition period of 2.0 years and $3.1 million with a weighted-average recogni-
tion period of 0.9 years, respectively.