Western Union 2006 Annual Report Download - page 95

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Notes to Consolidated Financial Statements 93
Stock-Based Compensation
In December 2005, First Data accelerated vesting of all
outstanding unvested stock options granted by First Data
to its officers and employees under First Data’s 2002
Long-Term Incentive Plan. The decision to accelerate the
vesting of these stock options was made primarily to reduce
stock-based compensation expense that otherwise likely
would be recorded in future periods following the adoption
of SFAS No. 123R. The Company recognized compensation
expense of $1.8 million during the fourth quarter of 2005
resulting from accelerated vesting. The Company must
recognize compensation expense related to any awards
outside of the First Data 2002 Long-Term Incentive Plan
that were not fully vested as of January 1, 2006, as well
as options granted after that date under either the First
Data plan or the Western Union plans.
As discussed in Note 1, effective January 1, 2006, the
Company adopted SFAS No. 123R following the modified
prospective method. The following table sets forth the
total impact on earnings for stock-based compensation
expense recognized in the Consolidated Statements of
Income resulting from stock options, restricted stock
awards, restricted stock units, and ESPP rights for Western
Union employees for the year ended December 31, 2006
(in millions). A benefit to earnings is reflected as a positive
and a reduction to earnings is reflected as a negative.
Year Ended
December 31, 2006
Income before income taxes $(23.3)
Income tax benefit from stock-based
compensation expense 8.8
Net income $(14.5)
Earnings per share:
Basic $(0.02)
Diluted $(0.02)
There was no stock-based compensation capitalized
during the year ended December 31, 2006. In addition, the
Company was allocated stock-based compensation expense
of $6.8 million during the year ended December 31, 2006
related to employees of First Data providing administrative
services to the Company prior to the spin-off. Including
allocations from First Data, total stock compensation
expense was $30.1 million in 2006 and $7.2 million in 2005.
A summary of Western Union activity for restricted stock awards and units relating to Western Union and First Data
employees for the year ended December 31, 2006 is listed below (awards/units in millions). All restricted stock awards
and units have been adjusted to reflect the conversion ratio as of the date of the spin-off, as all restricted stock
awards and units prior to the spin-off were in First Data stock:
Year Ended December 31, 2006
Weighted-Average
Number Grant-Date
Outstanding Fair Value
Non-vested at January 1, 0.2 $18.42
Granted 1.9 19.51
Western Union unvested restricted stock awards and units
issued to First Data employees on spin-off date 1.1 20.49
Vested (0.1) 18.76
Forfeited (0.1) 20.48
Non-vested at December 31, 3.0 $19.80