Equifax 2013 Annual Report Download - page 29

53 EQUIFAX 2013 ANNUAL REPORT
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, 2013, 2012 and 2011, was estimated at the
date of grant, using the binomial model with the following weighted-
average assumptions:
Twelve Months Ended
December 31,
2013 2012 2011
Dividend yield 1.5% 1.8% 1.8%
Expected volatility 25.8% 31.9% 32.7%
Risk-free interest rate 1.3% 0.6% 1.2%
Expected term (in years) 4.9 4.9 4.8
Weighted-average fair value
of stock options granted $11.95 $10.67 $7.85
The following table summarizes changes in outstanding stock options during the twelve months ended December 31, 2013, as well as stock
options that are vested and expected to vest and stock options exercisable at December 31, 2013:
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
(in thousands) (in years) (in millions)
Outstanding at December 31, 2012 4,748 $34.64
Granted (all at market price) 346 $60.15
Exercised (1,469) $32.58
Forfeited and cancelled (95) $44.24
Outstanding at December 31, 2013 3,530 $37.85 6.3 $110.3
Vested and expected to vest at December 31, 2013 3,256 $37.76 6.3 $102.0
Exercisable at December 31, 2013 2,495 $34.45 5.4 $ 86.4
The aggregate intrinsic value amounts in the table above represent
the difference between the closing price of Equifax’s common stock
on December 31, 2013 and the exercise price, multiplied by the
number of in-the-money stock options as of the same date. This
represents the value that would have been received by the stock
option holders if they had all exercised their stock options on
December 31, 2013. In future periods, this amount will change
depending on fluctuations in Equifax’s stock price. The total intrinsic
value of stock options exercised during the twelve months ended
December 31, 2013, 2012 and 2011, was $43.2 million, $38.3 million
and $9.9 million, respectively. At December 31, 2013, our total
unrecognized compensation cost related to stock options was
$3.9 million with a weighted-average recognition period of 1.5 years.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
54 EQUIFAX 2013 ANNUAL REPORT
The following table summarizes changes in outstanding options and the related weighted-average exercise price per share for the twelve
months ended December 31, 2012 and 2011:
December 31,
2012 2011
Shares
Weighted-
Average Price Shares
Weighted-
Average Price
(Shares in thousands) (Shares in thousands)
Outstanding at the beginning of the year 6,715 $31.82 6,526 $30.63
Granted (all at market price) 501 $47.04 1,298 $32.94
Exercised (2,352) $29.37 (947) $25.02
Forfeited and cancelled (116) $31.85 (162) $32.99
Outstanding at the end of the year 4,748 $34.64 6,715 $31.82
Exercisable at end of year 3,061 $33.34 4,289 $31.71
Nonvested Stock. Our 2008 Omnibus Incentive Plan also provides
for awards of nonvested shares of our common stock that can be
granted to executive officers, employees and directors. Nonvested
stock awards are generally subject to cliff vesting over a period
between one to three years based on service.
The fair value of nonvested stock is based on the fair market value of
our common stock on the date of grant. However, since our non-
vested stock does not accrue or pay dividends during the vesting
period, the fair value on the date of grant is reduced by the present
value of the expected dividends over the requisite service period
(discounted using the appropriate risk-free interest rate).
In 2013 and 2012, pursuant to our 2008 Omnibus Incentive Plan,
certain executive officers were granted nonvested shares in which the
number of shares is dependent upon the Company’s three-year rela-
tive total shareholder return as compared to the three-year
cumulative average quarterly shareholder return of the companies in
the S&P 500 stock index, as comprised on the grant date, subject to
adjustment. The number of shares which could potentially be issued
ranges from zero to 200% of the target award. The grants outstand-
ing subject to market performance as of December 31, 2013 would
result in 334,778 shares outstanding at 100% of target and 669,556
at 200% of target at the end of the vesting period. Compensation
expense is recognized on a straight-line basis over the measurement
period and is based upon the fair market value of the shares
estimated to be earned at the date of grant. The fair value of the
performance-based shares is estimated on the date of grant using a
Monte-Carlo simulation.
The following table summarizes changes in our nonvested stock dur-
ing the twelve months ended December 31, 2013, 2012 and 2011
and the related weighted-average grant date fair value:
(in thousands) Shares
Weighted-Average
Grant Date
Fair Value
Nonvested at December 31, 2010 1,310 $31.54
Granted 513 $34.07
Vested (340) $34.34
Forfeited (52) $30.70
Nonvested at December 31, 2011 1,431 $31.79
Granted 685 $44.59
Vested (440) $29.02
Forfeited (60) $33.31
Nonvested at December 31, 2012 1,616 $37.95
Granted 621 $57.82
Vested (479) $33.05
Forfeited (63) $40.99
Nonvested at December 31, 2013 1,695 $46.50
The total fair value of nonvested stock that vested during the
twelve months ended December 31, 2013, 2012 and 2011, was
$29.1 million, $19.9 million and $12.1 million, respectively, based on
the weighted-average fair value on the vesting date, and $15.8 mil-
lion, $12.8 million and $11.7 million, respectively, based on the
weighted-average fair value on the date of grant. At December 31,
2013, our total unrecognized compensation cost related to non-
vested stock was $29.1 million with a weighted-average recognition
period of 1.8 years.