eTrade 2007 Annual Report Download - page 135

Prior to its adoption of SFAS No. 123(R), the Company recorded compensation expense for restricted stock
awards on a straight-line basis over their vesting period. If an employee forfeited the award prior to vesting, the
Company reversed out the previously expensed amounts in the period of forfeiture. As required upon adoption of
SFAS No. 123(R), the Company must base its accruals of compensation expense on the estimated number of
awards for which the requisite service period is expected to be rendered. Actual forfeitures are no longer
recorded in the period of forfeiture. In 2005, the Company recorded a pre-tax credit of $2.8 million in cumulative
effect of accounting change, that represents the amount by which compensation expense would have been
reduced in periods prior to adoption of SFAS No. 123(R) for restricted stock awards outstanding on July 1, 2005
that are anticipated to be forfeited.
A summary of non-vested restricted stock award and restricted stock unit activity is presented below:
Shares
(in thousands)
Weighted-
Average
Grant
Date Fair
Value
Non-vested at December 31, 2006: 2,878 $13.01
Issued 830 $22.85
Released (vested) (514) $15.93
Canceled (1,197) $13.75
Non-vested at December 31, 2007: 1,997 $15.91
As of December 31, 2007, there was $15.3 million of total unrecognized compensation cost related to
non-vested awards. This cost is expected to be recognized over a weighted-average period of 1.6 years. The total
fair value of restricted shares and restricted stock units vested was $11.0 million, $7.5 million and $4.1 million
for the years ended December 31, 2007, 2006 and 2005, respectively.
Employee Stock Purchase Plan
The shareholders of the Company previously approved the 2002 Employee Stock Purchase Plan (“2002
Purchase Plan”), and reserved 5,000,000 shares of common stock for sale to employees at a price no less than
85% of the lower of the fair market value of the common stock at the beginning of the one-year offering period
or the end of each of the six-month purchase periods. Under SFAS No. 123(R), the 2002 Purchase Plan was
considered compensatory. Effective August 1, 2005, the Company changed the terms of its purchase plan to
reduce the discount to 5% and discontinued the look-back provision. As a result, the purchase plan was not
compensatory beginning August 1, 2005.
For the year ended December 31, 2005, the Company recorded $0.4 million in compensation expense for its
employee stock purchase plan for the period in which the 2002 Plan was considered compensatory until the terms
were changed August 1, 2005. At December 31, 2007, 757,123 shares were available for purchase under the 2002
Purchase Plan.
401(k) Plan
The Company has a 401(k) salary deferral program for eligible employees who have met certain service
requirements. The Company matches certain employee contributions; additional contributions to this plan are at
the discretion of the Company. Total contribution expense under this plan was $5.7 million, $5.7 million and
$5.2 million for the years ended December 31, 2007, 2006 and 2005, respectively.
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