Autodesk 2006 Annual Report Download - page 100

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The following table illustrates the effect on net income and net income per share if Autodesk had applied
the fair value recognition provisions of SFAS 123 to stock-based employee compensation. For purposes of
computing pro forma net income, the estimated fair value of options is amortized to expense on a straight-line
basis over the options’ vesting period.
Fiscal year ended January 31,
2006 2005 2004
Net income — as reported .......................... $328.9 $221.5 $120.3
Add: Stock-based employee compensation cost,
net of related tax effects, included in the
determination of net income as reported ......... 0.4 3.1 1.2
Deduct: Total stock-based employee
compensation cost determined under the
fair value based method for all awards,
net ofrelated taxeffects .......................... (71.8) (61.5) (48.7)
Pro forma net income ............................... $257.5 $163.1 $ 72.8
Net income per share:
Basic — as reported ............................... $ 1.44 $0.98 $ 0.54
Basic — pro forma ................................ $ 1.12 $0.72 $ 0.33
Diluted — as reported ............................ $ 1.33 $0.90 $ 0.52
Diluted — pro forma .............................. $ 1.05 $ 0.67 $ 0.32
The weighted average estimated fair value of stock options granted was $13.41per share during fiscal 2006,
$7.96 during fiscal 2005 and $4.04 during fiscal 2004. These were estimated using the Black-Scholes option-
pricing model, based on the following assumptions:
2006 2005 2004
Volatility.............................................. 0.43 0.48 0.60
Weighted-average estimated life ..................... 4.2years 4.8 years 5 years
Weighted-average risk-free interest rate ............. 4.2% 3.6% 3.2%
Dividend yield ........................................ 0.0% 0.3% 0.7%
During the third quarter of fiscal 2006, Autodesk revised its approach to estimating expected volatility on
its stock awards granted during the quarter. Expected volatility is one of several assumptions in the Black-Scholes
model used by Autodesk to make an estimate of the fair value of options granted under the Company’s stock
plans and the rights to purchase shares under the employee stock purchase plan. Prior to the third quarter of
fiscal 2006, Autodesk estimated expected volatility solely based on historical stock volatility. Under its current
method of estimating expected volatility, Autodesk has considered both the historical volatility in the trading
market for its common stock as well as the implied volatility of tradable forward call options to purchase shares
of its common stock. The Company believes this approach results in a better estimate of expected volatility.
The weighted average estimated fair value of shares granted under the employee qualified stock purchase
plan was $14.36 per share during fiscal 2006, $9.35 during fiscal 2005 and $3.26 during fiscal 2004. These were
estimated using the Black-Scholes option-pricing model, based on the following assumptions:
2006 2005 2004
Volatility ............................................. 0.36 0.43 0.47
Weighted-average estimated life .................... 1.25years 1.25 years 1.25 years
Weighted-average risk-free interest rate ............. 3.8% 2.2% 1.3%
Dividend yield ....................................... 0.0% 0.3% 0.6%
AUTODESK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 1. Business and Summary of Significant Accounting Policies (Continued)
54