HP 2014 Annual Report Download - page 126

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 5: Stock-Based Compensation (Continued)
Stock-Based Compensation Expense and Related Income Tax Benefits
Stock-based compensation expense and the resulting tax benefits were as follows:
For the fiscal years ended
October 31
2014 2013 2012
In millions
Stock-based compensation expense ................................. $560 $500 $635
Income tax benefit ............................................ (179) (158) (197)
Stock-based compensation expense, net of tax ......................... $381 $342 $438
Cash received from option exercises and purchases under the Hewlett-Packard Company 2011
Employee Stock Purchase Plan (the ‘‘2011 ESPP’’) was $0.3 billion in fiscal 2014, $0.3 billion in fiscal
2013 and $0.7 billion in fiscal 2012. The benefit realized for the tax deduction from option exercises in
fiscal 2014, 2013 and 2012 was $51 million, $13 million and $57 million, respectively.
Stock-Based Incentive Compensation Plans
HP’s stock-based incentive compensation plans include equity plans adopted in 2004, 2000 and
1995, as amended (‘‘principal equity plans’’), as well as various equity plans assumed through
acquisitions under which stock-based awards are outstanding. Stock-based awards granted from the
principal equity plans include restricted stock awards, stock options and performance-based awards.
Employees meeting certain employment qualifications are eligible to receive stock-based awards.
Restricted stock awards are non-vested stock awards that may include grants of restricted stock or
restricted stock units. Restricted stock awards and cash-settled awards are generally subject to forfeiture
if employment terminates prior to the lapse of the restrictions. Such awards generally vest one to three
years from the date of grant. During the vesting period, ownership of the restricted stock cannot be
transferred. Restricted stock has the same dividend and voting rights as common stock and is
considered to be issued and outstanding upon grant. The dividends paid on restricted stock are non-
forfeitable. Restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid
on common stock. Restricted stock units do not have the voting rights of common stock, and the shares
underlying restricted stock units are not considered issued and outstanding upon grant. However, shares
underlying restricted stock units are included in the calculation of diluted net EPS. HP expenses the
fair value of restricted stock awards ratably over the period during which the restrictions lapse.
Stock options granted under the principal equity plans are generally non-qualified stock options,
but the principal equity plans permit some options granted to qualify as incentive stock options under
the U.S. Internal Revenue Code. Stock options generally vest over three to four years from the date of
grant. The exercise price of a stock option is equal to the closing price of HP’s stock on the option
grant date. The majority of stock options issued by HP contain only service vesting conditions.
However, starting in fiscal 2011, HP began granting performance-contingent stock options that vest only
on the satisfaction of both service and market conditions prior to the expiration of the awards.
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