Computer Associates 2006 Annual Report Download - page 155

Note 9 — Stock Plans (Continued)
The Company recognized stock-based compensation in the following line items in the Consolidated Statements of
Operations for the periods indicated:
2006 2005 2004
Year Ended March 31,
(restated) (restated)
(in millions)
Cost of professional services................................. $ 3 $ 5 $ 6
Selling, general, and administrative ............................ 64 60 77
Product development and enhancements ........................ 32 35 43
Share-based compensation expense before tax .................... 99 100 126
Income tax benefit ........................................ (28) (27) (31)
Net compensation expense .................................. $71 $ 73 $ 95
Total unrecognized compensation costs related to non-vested awards, expected to be recognized over a weighted
average period of 1.4 years, amounted to $102 million at March 31, 2006.
There were no capitalized share-based compensation costs at March 31, 2006, 2005 or 2004.
Share-based incentive awards are provided to employees under the terms of the Company’s equity compensation
plans (the Plans). The Plans are administered by the Compensation and Human Resource Committee of the Board of
Directors (the Committee). Awards under the Plans may include at-the-money stock options, premium-priced stock
options, restricted stock awards (RSAs), restricted stock units (RSUs), performance share units (PSUs), or any
combination thereof. The non-employee members of the Company’s Board of Directors also receive deferred stock
units under a separate director compensation plan.
RSAs are stock awards issued to employees that are subject to specified restrictions and a risk of forfeiture. The
restrictions typically lapse over a two or three year period. The fair value of the awards is determined and fixed
based on the Company’s stock price on the grant date.
RSUs are stock awards that are issued to employees that entitle the holder to receive shares of common stock as the
awards vest, typically over a two or three year period. The fair value of the awards is determined and fixed based on
the Company’s stock price on the grant date, except that for RSUs not entitled to dividend equivalents, the stock
price is reduced by the present value of the expected dividend stream during the vesting period which is calculated
using the risk-free interest rate.
PSUs are awards issued under the long-term incentive plan for senior executives where the number of shares
ultimately granted to the employee depends on Company performance measured against specified targets and is
determined after a one-year or three-year period as applicable, the “1-year and 3-year PSUs”, respectively. The fair
value of each award is estimated on the date that the performance targets are established based on the fair value of
the Company’s stock, adjusted for dividends as described above for RSUs, and the Company’s estimate of the level
of achievement of its performance targets, as described below. The Company is required to recalculate the fair value
of issued PSUs each reporting period until they are granted, as defined in SFAS No. 123(R). The adjustment is based
on the fair value of the Company’s stock on the reporting period date, adjusted for dividends as described above for
RSUs.
Stock options are awards which allow the employee to purchase shares of the Company’s stock at a fixed price.
Beginning in fiscal year 2002, stock options are granted at an exercise price equal to or greater than the Company’s
stock price on the date of grant. Refer to Note 12, “Restatements” for the discussion of the Company’s prior practice
with respect to granting stock options. Awards granted after fiscal year 2000 generally vest one-third per year,
become fully vested two or three years from the grant date and have a contractual term of ten years.
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