ADP 2012 Annual Report Download - page 73

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1
Employee Stock Purchase Plan. The Company offers an employee stock purchase plan that allows eligible employees to purchase
shares of common stock at a price equal to 95% of the market value for the Company's common stock on the last day of the offering
period. This plan has been deemed non-compensatory and therefore, no compensation expense has been recorded.
1
Restricted Stock.
2
Time-Based Restricted Stock. The Company has issued time-based restricted stock to certain key employees. These shares are
restricted as to transfer and in certain circumstances must be returned to the Company at the original purchase price. The
Company records stock compensation expense relating to the issuance of restricted stock based on market prices on the date of
grant on a straight-line basis over the period in which the transfer restrictions exist, which is up to five years from the date of
grant.
2
Performance-Based Restricted Stock. The performance-based restricted stock program has a one-year performance period,
and a subsequent six-month service period. Under this program, the Company communicates "target awards" to employees at
the beginning of the performance period and, as such, dividends are not paid in respect of the "target awards" during the
performance period. After the performance period, if the performance targets are achieved, associates are eligible to receive
dividends on shares awarded under the program. The performance target is based on earnings per share growth over the
performance period, with possible payouts ranging from 0% to 150% of the "target awards." Stock-
based compensation expense
is measured based upon the fair value of the award on the grant date. Compensation expense is recognized on a straight-line
basis over the vesting period of approximately 18 months, based upon the probability that the performance target will be met.
The Company currently utilizes treasury stock to satisfy stock option exercises, issuances under the Company's employee stock purchase plan
and restricted stock awards. From time to time, the Company may repurchase shares of its common stock under its authorized share repurchase
programs. The Company repurchased 14.6 million shares in fiscal 2012 as compared to 14.2 million shares repurchased in fiscal 2011. The
Company considers several factors in determining when to execute share repurchases, including, among other things, actual and potential
acquisition activity, cash balances and cash flows, issuances due to employee benefit plan activity, and market conditions.
Stock-based compensation expense of $78.7 million, $76.3 million, and $67.6 million was recognized in earnings from continuing operations
in fiscal 2012, 2011, and 2010, respectively, as well as related tax benefits of $29.0 million, $28.2 million, and $22.3 million, respectively.
66
Years ended June 30, 2012
2011
2010
Operating expenses
$
13.4
$
13.1
$
11.7
Selling, general and administrative expenses
53.8
51.8
45.9
System development and programming costs
11.5
11.4
10.0
Total pretax stock-based compensation expense $
78.7
$
76.3
$
67.6