Equifax 2011 Annual Report Download - page 60

Equifax and its subsidiaries are subject to U.S. federal, state and
international income taxes. We are generally no longer subject to
federal, state or international income tax examinations by tax authori-
ties for years before 2006. Due to the potential for resolution of state
and foreign examinations, and the expiration of various statutes of
limitations, it is reasonably possible that Equifax’s gross unrecognized
tax benefit balance may change within the next twelve months by a
range of zero to $4.6 million.
9. STOCK-BASED COMPENSATION
We have one active share-based award plan, the 2008 Omnibus
Incentive Plan which was approved by our shareholders in 2008, that
provides our directors, officers and certain employees with stock
options and nonvested stock. The plan is described below. We
expect to issue common shares held by treasury stock upon the
exercise of stock options or once nonvested shares vest. Total stock-
based compensation expense in our Consolidated Statements of
Income during the twelve months ended December 31, 2011, 2010
and 2009, was as follows:
Twelve Months Ended
December 31,
(in millions) 2011 2010 2009
Cost of services $ 3.6 $ 3.6 $ 2.6
Selling, general and
administrative expenses 20.8 18.2 17.0
Stock-based compensation
expense, before income
taxes $24.4 $21.8 $19.6
The total income tax benefit recognized for stock-based compensa-
tion expense was $8.7 million, $7.8 million and $6.9 million for the
twelve months ended December 31, 2011, 2010 and 2009,
respectively.
Benefits of tax deductions in excess of recognized compensation
cost are reported as a financing cash flow, rather than as an operat-
ing cash flow. This requirement reduced operating cash flows and
increased financing cash flows by $1.2 million, $3.5 million and
$1.3 million during the twelve months ended December 31, 2011,
2010 and 2009, respectively.
Stock Options. The 2008 Omnibus Incentive Plan provides that
qualified and nonqualified stock options may be granted to officers
and other employees. In conjunction with our acquisition of TALX, we
assumed options outstanding under the legacy TALX stock option
plan, which was approved by TALX shareholders. In addition, stock
options remain outstanding under three shareholder-approved plans
and three non-shareholder-approved plans from which no new grants
may be made. The 2008 Omnibus Incentive Plan requires that stock
options be granted at exercise prices not less than market value on
the date of grant. Generally, stock options are subject to graded
vesting for periods of up to three years based on service, with 33%
vesting for each year of completed service, and expire ten years from
the grant date.
We use the binomial model to calculate the fair value of stock options
granted on or after January 1, 2006. The binomial model incorporates
assumptions regarding anticipated employee exercise behavior,
expected stock price volatility, dividend yield and risk-free interest
rate. Anticipated employee exercise behavior and expected post-
vesting cancellations over the contractual term used in the binomial
model were primarily based on historical exercise patterns. These
historical exercise patterns indicated there was not significantly differ-
ent exercise behavior between employee groups. For our expected
stock price volatility assumption, we weighted historical volatility and
implied volatility. We used daily observations for historical volatility,
while our implied volatility assumption was based on actively traded
options related to our common stock. The expected term is derived
from the binomial model, based on assumptions incorporated into
the binomial model as described above.
The fair value for stock options granted during the twelve months
ended December 31, 2011, 2010 and 2009, was estimated at the
date of grant, using the binomial model with the following weighted-
average assumptions:
Twelve Months Ended
December 31,
(in millions) 2011 2010 2009
Dividend yield 1.8% 0.5% 0.6%
Expected volatility 32.7% 29.9% 32.3%
Risk-free interest rate 1.2% 1.6% 2.0%
Expected term (in years) 4.8 4.6 4.6
Weighted-average fair value
of stock options granted $7.85 $8.28 $7.90
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
EQUIFAX 2011 ANNUAL REPORT
58