Stock-based Compensation Expense

Stock Plans

As of April 30, 2013, Autodesk maintained two active stock plans for the purpose of granting equity awards to employees and to non-employee members of Autodesk’s Board of Directors: the 2012 Employee Stock Plan (“2012 Employee Plan”), which is available only to employees, and the Autodesk 2012 Outside Directors’ Plan (“2012 Directors' Plan”), which is available only to non-employee directors. Additionally, there are eight expired or terminated plans with options outstanding. The exercise price of all stock options granted under these plans was equal to the fair market value of the stock on the grant date.

The 2012 Employee Plan was approved by Autodesk's stockholders and became effective in January 2012. The 2012 Employee Plan reserves up to 21.2 million shares which includes 15.2 million shares reserved upon the effectiveness of the 2012 Employee Plan as well as up to 6.0 million shares forfeited under certain prior employee stock plans during the life of the 2012 Employee Plan. The 2012 Employee Plan permits the grant of stock options, restricted stock units and restricted stock awards. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Employee Plan as 1.79 shares. If a granted option, restricted stock unit or restricted stock award expires or becomes unexercisable for any reason, the unpurchased or forfeited shares that were granted may be returned to the 2012 Employee Plan and may become available for future grant under the 2012 Employee Plan. As of April 30, 2013, 9.0 million shares subject to options and restricted stock units have been granted under the 2012 Employee Plan. Options and restricted stock units that were granted under the 2012 Stock Plan vest over periods ranging from immediately upon grant to over a three-year period and options expire 10 years from the date of grant. The 2012 Employee Plan will expire on June 30, 2022. At April 30, 2013, 10.3 million shares were available for future issuance under the 2012 Employee Plan.

The 2012 Directors' Plan was approved by Autodesk's stockholders in January 2012. The 2012 Directors' Plan permits the grant of stock options, restricted stock units and restricted stock awards to non-employee members of Autodesk’s Board of Directors. Each restricted stock unit or restricted stock award granted will be counted against the shares authorized for issuance under the 2012 Directors' Plan as 2.11 shares. As of April 30, 2013, 0.2 million restricted stock units have been granted under the 2012 Directors' Plan. Restricted stock units that were granted under the 2012 Directors' Plan vest over one to three years from the date of grant. The 2012 Directors' Plan reserved 2.6 million shares of Autodesk common stock. The 2012 Directors' Plan will expire on June 30, 2022. At April 30, 2013, 2.4 million shares were available for future issuance under the 2012 Directors' Plan.

The following sections summarize activity under Autodesk’s stock plans.

Stock Options:

A summary of stock option activity for the three months ended April 30, 2013 is as follows:



	Number of Shares		Weighted average exercise price per share		Weighted average remaining contractual term	Aggregate Intrinsic Value (3)
	(in millions)				(in years)	(in millions)
Options outstanding at January 31, 2013	19.0		$	32.69
Granted (1)	—		—
Exercised	(2.0	)	23.46
Canceled	(0.3	)	40.21
Options outstanding at April 30, 2013	16.7		$	33.66	3.6	$	126.5
Options vested and exercisable at April 30, 2013	14.3		$	32.96	3.1	$	119.3
Options vested as of April 30, 2013 and expected to vest thereafter (2)	16.6		$	33.64	3.6	$	126.3
Options available for grant at April 30, 2013	12.7

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(1)	Autodesk did not grant stock options in the three months ended April 30, 2013.


(2)	Options expected to vest reflect an estimated forfeiture rate.


(3)	Represents the total pre-tax intrinsic value, based on Autodesk’s closing stock price of $39.38 per share as of April 30, 2013, which would have been received by the option holders had all option holders exercised their options as of that date.

As of April 30, 2013, total compensation cost of $27.0 million related to non-vested options is expected to be recognized over a weighted average period of 1.2 years. The following table summarizes information about the pre-tax intrinsic value of options exercised, and the weighted average grant date fair value per share of options granted, during the three months ended April 30, 2013, and 2012.



	Three Months Ended
	April 30, 2013		April 30, 2012
Pre-tax intrinsic value of options exercised (1)	$	32.8	$	60.3
Weighted average grant date fair value per share of stock options granted (2) (3)	N/A		$	13.43

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(1)	The intrinsic value of options exercised is calculated as the difference between the exercise price of the option and the market value of the stock on the date of exercise.


(2)	The weighted average grant date fair value of stock options granted is calculated, as of the stock option grant date, using the Black-Scholes-Merton option pricing model.


(3)	Autodesk did not grant stock options in the three months ended April 30, 2013.

The following table summarizes information about options outstanding and exercisable at April 30, 2013:



	Options Vested and Exercisable						Options Outstanding
	Number of Shares (in millions)	Weighted average contractual life (in years)	Weighted average exercise price		Aggregate intrinsic value (1) (in millions)		Number of Shares (in millions)	Weighted average contractual life (in years)	Weighted average exercise price		Aggregate intrinsic value (1) (in millions)
Range of per-share exercise prices:
$2.28 - $28.56	3.3		$	15.99			3.5		$	16.62
$28.57 - $31.22	2.9		29.53				3.4		29.54
$31.23 - $38.55	2.3		33.79				2.5		34.03
$38.56 - $41.62	2.2		41.62				3.3		41.62
$41.63 - $49.80	3.6		45.52				4.0		45.38
	14.3	3.1	$	32.96	$	119.3	16.7	3.6	$	33.66	$	126.5

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(1)	Represents the total pre-tax intrinsic value, based on Autodesk’s closing stock price of $39.38 per share as of April 30, 2013, which would have been received by the option holders had all option holders exercised their options as of that date.

These options will expire if not exercised at specific dates ranging through September 2022.

Restricted Stock:

A summary of restricted stock unit and restricted stock award activity for the three months ended April 30, 2013 is as follows:



	Unreleased Restricted Stock		Weighted average grant date fair value per share
	(in thousands)
Unreleased restricted stock at January 31, 2013	5,020.8		$	33.89
Granted	1,078.0		41.58
Released	(714.5	)	35.66
Canceled	(180.0	)	35.31
Performance Adjustment (1)	(14.0	)	35.94
Unreleased restricted stock at April 30, 2013	5,190.3		$	35.27

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(1)	Based on Autodesk financial results for the performance period, the fiscal 2013 performance stock units were earned at 92.3% of the target award. The fiscal 2013 performance stock units will pay out at 92.3% percent of the target award; however, the vesting of the performance stock units is subject to the holders satisfying the remaining service condition of the awards.

During the three months ended April 30, 2013, Autodesk granted 0.5 million restricted stock units. The restricted stock units vest over periods ranging from immediately upon grant to a pre-determined date that is typically within three years from the date of grant. Restricted stock units are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. The fair value of the restricted stock units is expensed ratably over the vesting period. Autodesk recorded stock-based compensation expense related to restricted stock units of $16.0 million during the three months ended April 30, 2013. Autodesk recorded stock-based compensation expense related to restricted stock units of $10.8 million during the three months ended April 30, 2012. As of April 30, 2013, total compensation cost not yet recognized of $97.5 million related to non-vested restricted stock units, is expected to be recognized over a weighted average period of 1.8 years. At April 30, 2013, the number of restricted stock units granted but unreleased was 4.4 million.

During the three months ended April 30, 2013, Autodesk granted 0.5 million performance restricted stock units ("PSUs") for which the ultimate number of shares earned is determined based on the achievement of performance criteria at the end of the stated performance period. The performance criteria is based upon annual revenue and non-GAAP operating margin goals adopted by the Compensation and Human Resource Committee (the “Annual Financial Results”), as well as total stockholder return compared against the S&P Computer Software Select Index (“Relative TSR”). Each PSU covers a three year period:


•	Up to one third of the PSU may vest following year one depending upon the achievement of Annual Financial Results for year one as well as 1 year Relative TSR (covering year one).


•	Up to one third of the PSU may vest following year two depending upon the achievement of Annual Financial Results for year two as well as 2 year Relative TSR (covering years one and two).


•	Up to one third of the PSU may vest following year three depending upon the achievement of Annual Financial Results for year three as well as 3 year Relative TSR (covering years one, two and three).

PSUs are not considered outstanding stock at the time of grant, as the holders of these units are not entitled to any of the rights of a stockholder, including voting rights. Autodesk has determined the grant-date fair value for these awards using a Monte Carlo simulation model since the awards are subject to a market condition. The fair value of the PSUs is expensed using the straight-line method over the vesting period. Autodesk recorded stock-based compensation expense related to PSUs of $2.7 million and $1.2 million for the three months ended April 30, 2013 and 2012, respectively. As of April 30, 2013, total compensation cost not yet recognized of $11.1 million related to non-vested performance restricted stock units, is expected to be recognized over a weighted average period of 1.7 years. At April 30, 2013, the number of PSUs granted but not vested was 0.8 million.

1998 Employee Qualified Stock Purchase Plan (“ESP Plan”)

Under Autodesk’s ESP Plan, which was approved by stockholders in 1998, eligible employees may purchase shares of Autodesk’s common stock at their discretion using up to 15% of their eligible compensation subject to certain limitations, at not less than 85% of fair market value as defined in the ESP Plan. At April 30, 2013, a total of 34.7 million shares were available for future issuance. This amount automatically increases on the first trading day of each fiscal year by an amount equal to the lesser of 10.0 million shares or 2% of the total of (1) outstanding shares plus (2) any shares repurchased by Autodesk during the prior fiscal year. Under the ESP Plan, the Company issues shares on the first trading day following March 31 and September 30 of each fiscal year. The ESP Plan expires during fiscal 2018.

Autodesk issued 1.5 million shares under the ESP Plan during the three months ended April 30, 2013 with an average price of $22.32 per share. During the three months ended April 30, 2012, Autodesk issued 1.6 million shares under the ESP Plan, at average prices of $21.63 per share, respectively. The weighted average grant date fair value of awards granted under the ESP Plan during the three months ended April 30, 2013, calculated as of the award grant date using the Black-Scholes-Merton option pricing model, was $11.84 per share. The weighted average grant date fair value of awards granted under the ESP Plan during the three months ended April 30, 2012, calculated as of the award grant date using the Black-Scholes-Merton option pricing model, was $14.00 per share.

Stock-based Compensation Expense

The following table summarizes stock-based compensation expense for the three months ended April 30, 2013 and 2012, respectively, as follows:



	Three Months Ended April 30, 2013			Three Months Ended April 30, 2012
Cost of license and other revenue	$	0.9		$	0.9
Cost of subscription	0.6			0.4
Marketing and sales	14.1			14.6
Research and development	10.9			11.1
General and administrative	7.0			6.4
Stock-based compensation expense related to stock awards and ESP Plan purchases	33.5			33.4
Tax benefit	(9.3		)	(8.7		)
Stock-based compensation expense related to stock awards and ESP Plan purchases, net of tax	$	24.2		$	24.7

Stock-based Compensation Expense Assumptions

Autodesk determines the grant-date fair value of our share-based payment awards using a Black-Scholes model or the quoted stock price on the date of grant, unless the awards are subject to market conditions, in which case we use a binomial-lattice model (e.g., Monte Carlo simulation model). The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that market conditions will be achieved. Autodesk uses the following assumptions to estimate the fair value of stock-based awards:



	Three Months Ended April 30, 2013			Three Months Ended April 30, 2012
	Stock Option (1)	Performance Stock Unit	ESP Plan	Stock Option	Performance Stock Unit (2)	ESP Plan
Range of expected volatilities	N/A	34%	27 - 36%	44 - 45%	N/A	41 - 43%
Range of expected lives (in years)	N/A	N/A	0.5 - 2.0	3.6 - 4.6	N/A	0.5 - 2.0
Expected dividends	N/A	—%	—%	—%	N/A	—%
Range of risk-free interest rates	N/A	0.1%	0.1 - 0.3%	0.5 - 0.8%	N/A	0.1 - 0.3%
Expected forfeitures	N/A	N/A	7.7%	7.8%	N/A	7.8%

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(1)	Autodesk did not grant stock options in the three months ended April 30, 2013.


(2)	Autodesk did not grant PSUs in the three months ended April 30, 2012 that were subject to market conditions.

Autodesk estimates expected volatility for stock-based awards based on the average of the following two measures. The first is a measure of historical volatility in the trading market for the Company’s common stock, and the second is the implied volatility of traded forward call options to purchase shares of the Company’s common stock. The expected volatility for PSUs subject to market conditions includes the expected volatility of Autodesk's peer companies within the S&P computer software select index.

Autodesk estimates the expected life of stock-based awards using both exercise behavior and post-vesting termination behavior as well as consideration of outstanding options.

Autodesk does not currently pay, and does not anticipate paying in the foreseeable future, any cash dividends. Consequently, an expected dividend yield of zero is used in the Black-Scholes-Merton option pricing model and the Monte Carlo simulation model.

The risk-free interest rate used in the Black-Scholes-Merton option pricing model and the Monte Carlo simulation model for stock-based awards is the historical yield on U.S. Treasury securities with equivalent remaining lives.

Autodesk recognizes expense only for the stock-based awards that are ultimately expected to vest. Therefore, Autodesk has developed an estimate of the number of awards expected to cancel prior to vesting (“forfeiture rate”). The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all stock-based awards. The Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.