Computer Associates 2006 Annual Report Download - page 161

Note 9 — Stock Plans (Continued)
purchase approximately 1.5 million shares of the Company’s stock. The weighted average fair value of the options
on the date of acquisition was $11.38. The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model. The weighted average assumptions that were used for option grants were as
follows:
Dividend yield ............................................................ 0.59%
Expected volatility factor .................................................... 0.46
Risk-free interest rate....................................................... 3.6%
Expected life (in years) ..................................................... 3.2
Refer to Note 2, “Acquisitions, Divestitures, and Restructuring,” for additional information concerning the
acquisition of Concord.
In connection with the Company’s acquisition of Netegrity in fiscal year 2005, options to purchase Netegrity
common stock were converted (using a ratio of 0.3573) into options to purchase approximately 1.4 million shares of
the Company’s stock. The weighted average fair value of the options on the date of acquisition was $20.19. The fair
value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The
weighted average assumptions that were used for option grants were as follows:
Dividend yield ............................................................ 0.26%
Expected volatility factor .................................................... 0.67
Risk-free interest rate....................................................... 3.4%
Expected life (in years) ..................................................... 4.5
Refer to Note 2, “Acquisitions, Divestitures, and Restructuring,” for additional information concerning the
acquisition of Netegrity.
The Company maintains the Year 2000 Employee Stock Purchase Plan (the Purchase Plan) for all eligible
employees. Consistent with the provisions of SFAS No. 123, the Purchase Plan under SFAS No. 123(R) is
considered compensatory. Under the terms of the Purchase Plan, employees may elect to withhold between 1% and
25% of their base pay through regular payroll deductions, subject to Internal Revenue Code limitations. Shares of
the Company’s common stock may be purchased at six-month intervals at 85% of the lower of the FMVon the first
or last day of each six-month period. During fiscal years 2006, 2005, and 2004, employees purchased approximately
1 million shares each year at average prices of $23.31, $23.38, and $14.63 per share, respectively. As of March 31,
2006, 24 million shares were reserved for future issuance.
The weighted average fair value of the Purchase Plan awards for offering periods commencing in fiscal years 2006,
2005, and 2004 was $5.86, $6.52, and $7.28, respectively. The fair value is estimated on the first date of the offering
period using the Black-Scholes option pricing model. The weighted average assumptions that were used for the
Purchase Plan shares in the respective periods are as follows:
2006 2005 2004
Year Ended March 31,
Dividend yield ................................................. .58% .27% .33%
Expected volatility factor
(1)
....................................... .20 .25 .53
Risk-free interest rate
(2)
.......................................... 3.9% 2.1% 1.0%
Expected life (in years)
(3)
......................................... 0.5 0.5 0.5
(1) Expected volatility is measured using historical daily price changes of the Company’s stock over the respective term of the offer period.
(2) The risk-free rate for periods within the contractual term of the offer period is based on the U.S. Treasury yield curve in effect at the
beginning of the offer period.
(3) The expected term is the offer period.
Under the 1998 Incentive Award Plan (the 1998 Plan), a total of four million Phantom Shares, as defined in the 1998
Plan, were available for grant to certain of the Company’s employees from time to time through March 31, 2003.
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