SAI » Topics » Stock-Based Compensation

These excerpts taken from the SAI 10-K filed Mar 30, 2009.

Stock-Based Compensation

The Company applies SFAS No. 123(R), “Share-Based Payment” (Note 10) in accounting for stock-based compensation, which requires that the Company recognize as compensation expense the fair value of all stock-based awards, including stock options, granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS No. 123(R) requires that the Company recognize as compensation expense the fair value of any discount greater than 5% on employee stock purchases made under its employee stock purchase plan.

Stock-Based Compensation

The Company applies SFAS No. 123(R), “Share-Based Payment” (Note 10) in accounting for stock-based compensation, which requires that the
Company recognize as compensation expense the fair value of all stock-based awards, including stock options, granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS
No. 123(R) requires that the Company recognize as compensation expense the fair value of any discount greater than 5% on employee stock purchases made under its employee stock purchase plan.

STYLE="margin-top:12px;margin-bottom:0px">Defined Benefit Plans

The Company sponsors a defined benefit plan
for eligible employees of its United Kingdom subsidiary that primarily perform services on a specific customer contract. The Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
Plans (an amendment of FASB Statements No. 87, 88, 106 and 132(R))” on January 31, 2007 (Note 9).

 


F-10  SAIC, Inc. Annual Report








SAIC, INC.

FACE="ARIAL" SIZE="2" COLOR="#2b4c9b">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 


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Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk primarily consist of cash equivalents and accounts receivable. At
January 31, 2009, the Company’s cash and cash equivalents, which include institutional money market funds, money market accounts and insured bank deposits, bear variable interest rates.

STYLE="margin-top:12px;margin-bottom:0px">Although credit risk is limited, the Company’s receivables are concentrated with its principal customers, which are the various agencies of the U.S. Government and customers
engaged in work for the U.S. Government.

These excerpts taken from the SAI 10-K filed Sep 3, 2008.

Stock-Based Compensation

On February 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment” (Note 11). This statement requires that the Company recognize as compensation expense the fair value of all stock-based awards, including stock options,

 

F-10  SAIC, Inc. Annual Report


SAIC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 


 

granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS No. 123(R) requires that the Company recognize as compensation expense the fair value of any discount greater than 5% on employee stock purchases made under its employee stock purchase plan (ESPP).

Stock-Based Compensation

On February 1, 2006, the Company
adopted SFAS No. 123(R), “Share-Based Payment” (Note 11). This statement requires that the Company recognize as compensation expense the fair value of all stock-based awards, including stock options,

 


F-10  SAIC, Inc. Annual Report








SAIC, INC.

FACE="ARIAL" SIZE="2" COLOR="#2b4c9b">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 


NOSHADE COLOR="#000000" ALIGN="left">

 


granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS No. 123(R) requires
that the Company recognize as compensation expense the fair value of any discount greater than 5% on employee stock purchases made under its employee stock purchase plan (ESPP).

FACE="ARIAL" SIZE="2" COLOR="#2b4c9b">Defined Benefit Plans

The Company sponsors a defined benefit plan for eligible employees of its United Kingdom
subsidiary that perform services on a specific customer contract. The Company adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (an amendment of FASB Statements No. 87, 88,
106 and 132(R)) on January 31, 2007 (Note 10).

This excerpt taken from the SAI 10-K filed Mar 28, 2008.

Stock-Based Compensation

On February 1, 2006, the Company adopted SFAS No. 123(R), “Share-Based Payment” (Note 10). This statement requires that the Company recognize as compensation expense the fair value of all stock-based awards, including stock options, granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS No. 123(R) requires that the Company recognize as compensation expense the fair value of any discount greater than 5% on employee stock purchases made under its employee stock purchase plan (ESPP).

 

F-10  SAIC, Inc. Annual Report


SAIC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

 


 

This excerpt taken from the SAI 10-K filed Apr 12, 2007.

Stock-Based Compensation

The Company adopted SFAS No. 123(R), “Share-Based Payment,” on February 1, 2006 (Note 11). This statement requires that the Company recognize as compensation expense the fair value of all stock-based awards, including stock options, granted to employees and directors in exchange for services over the requisite service period, which is typically the vesting period. SFAS No. 123(R) requires that the Company recognize as compensation expense the fair value of the 15% discount on employee stock purchases made under its Employee Stock Purchase Plan (ESPP).

Prior to February 1, 2006, the Company accounted for employee stock-based compensation using the intrinsic value method of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations. Under the intrinsic value method, no compensation expense was reflected in net income for stock options granted to employees and directors, as all stock options had an exercise price equal to the fair value of the underlying stock on the date of grant. Additionally, no compensation expense was recognized for the ESPP because it was a non-compensatory plan. Compensation expense was recognized for grants of vesting and vested stock awards based on the fair value of the underlying stock on the date of grant, with vesting stock expense recognized on a straight-line basis over the period in which the awards were earned. The Company accounted for stock options granted to non-employees using the fair value method under SFAS No. 123, “Accounting for Stock-Based Compensation.”

The Company adopted SFAS No. 123(R) using the modified prospective transition method for stock-based awards granted after September 1, 2005, the date the Company made its initial filing with the SEC for the initial public offering as described above, and the prospective transition method for stock-based awards granted prior to September 1, 2005. The difference in accounting treatment between options granted prior to and after September 1, 2005 is due to the fact that the Company met the definition of a non-public company under SFAS No. 123 and applied the minimum value method (assumed no volatility in its pro forma stock-based employee compensation expense disclosures) under SFAS No. 123 prior to September 1, 2005. Under these transition methods, compensation expense associated with stock options during the year ended January 31, 2007, includes (1) amortization related to the remaining unvested portion of all stock option awards granted between September 1, 2005 and January 31, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123 and (2) amortization related to all stock option awards granted subsequent to January 31, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). In accordance with the modified prospective transition method, results from prior periods have not been restated. Under the prospective transition method, there is no compensation expense resulting from options granted to employees and directors prior to September 1, 2005 unless a modification is made to those options

 

F-12


SAIC, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

other than a modification in conjunction with an equity restructuring to equalize the fair value of the options immediately before and after an equity restructuring. In connection with the reorganization merger as described above, a modification was made to outstanding stock options in order to equalize the fair value, which consequently did not result in any incremental fair value or compensation expense.

Compensation expense recorded for stock options and vesting stock includes an estimated forfeiture rate. For vesting stock granted prior to September 1, 2005, the Company had accounted for the effects of forfeitures of vesting stock as the forfeitures occurred until the completion of the initial public offering and reorganization merger. In connection with the reorganization merger, which constituted a modification in connection with an equity restructuring, the Company recorded a cumulative effect adjustment, which reduced stock-based compensation by $12 million, to apply a forfeiture rate to vesting stock granted prior to September 1, 2005 and to accelerate compensation expense over the requisite service period on certain of those awards granted to special retirement eligible persons. As a result, all future stock-based compensation expense on vesting stock and stock options will include an estimated forfeiture rate. Additionally, the Company reclassified all remaining unearned compensation at the time of modification to additional paid-in capital.

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