Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2012

Weighted-Average Assumptions Used to Determine Fair Value of SARs Grants on Date of Grant Using Black-Scholes-Merton Valuation Model

The fair value of the SARs was estimated on the date of grant using the Black-Scholes-Merton valuation model with the following weighted-average assumptions:

	Three Months Ended March 31,
	2012			2011
Expected dividend yield (1)		0	%		0	%
Expected stock price volatility (2)		40	%		38	%
Risk-free interest rate (3)		0.8	%		2.2	%
Expected life in years (4)		4.6			4.8

(1)	The dividend yield assumption is based on the history and expectation of the Company’s dividend payouts. Historically, Gartner has not paid cash dividends on its Common Stock.
(2)	The determination of expected stock price volatility was based on both historical Common Stock prices and implied volatility from publicly traded options in the Common Stock.
(3)	The risk-free interest rate is based on the yield of a U.S. Treasury security with a maturity similar to the expected life of the award.
(4)	The expected life represents the Company’s weighted-average estimate of the period of time the SARs are expected to be outstanding (that is, the period between the service inception date and the expected exercise date). Beginning January 1, 2012, the expected life has been calculated based on the Company’s historical exercise data. Previously, the Company determined the expected life based on a simplified calculation permitted by SEC SAB No. 107and SAB No. 110 since the necessary historical exercise data was not available. The change in methodology had an insignificant impact on the expected life.

Stock-Based Compensation Expense by Award Type

The Company recognized the following amounts of stock-based compensation expense by award type and category in the periods indicated (in millions):

	Three Months Ended March 31,
Award type:	2012		2011
Stock appreciation rights	$	1.6	$	1.5
Common stock equivalents		0.1		0.1
Restricted stock units		9.2		7.6
Total	$	10.9	$	9.2

Stock-Based Compensation Expense Recognized in Consolidated Statements of Operations

	Three Months Ended March 31,
Amount recorded in:	2012		2011
Cost of services and product development	$	5.3	$	4.5
Selling, general and administrative		5.6		4.7
Total stock-based compensation expense (1)	$	10.9	$	9.2

(1) Includes charges of $3.0 million and $2.5 million for the three months ended March 31, 2012 and 2011 respectively, related to awards to retirement-eligible employees, since a portion of the awards vest immediately.

Summary of Changes in Stock Options Outstanding

The following table summarizes the changes in stock options outstanding during the three months ended March 31, 2012:

	Options in millions			Per Share Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (in millions)
Vested and outstanding at December 31, 2011		1.2		$	10.93		1.47 years	$	27.7
Expired		—			—		na		na
Exercised (1)		(0.4	)		11.03		na		na
Vested and outstanding at March 31, 2012		0.8		$	10.87		1.35 years	$	24.1
na=not applicable

(1) Options exercised during the three months ended March 31, 2012 had an intrinsic value of $11.5 million.

Stock Appreciation Rights

Summary of Changes in Stock-Based Compensation Awards Outstanding

The following table summarizes changes in SARs outstanding during the three months ended March 31, 2012:

	SARs (in millions)			Per Share Weighted- Average Exercise Price		Per Share Weighted- Average Grant Date Fair Value		Weighted Average Remaining Contractual Term
Outstanding at December 31, 2011		2.5		$	20.39	$	7.66		4.00 years
Granted		0.4			37.81		12.99		6.90 years
Forfeited		—			—		—		n/a
Exercised		(0.4	)		19.28		7.26		n/a
Outstanding at March 31, 2012 (1), (2)		2.5		$	23.20	$	8.53		4.38 years
Vested and exercisable at March 31, 2012 (2)		1.4		$	18.36	$	6.91		3.35 years
n/a=not applicable

(1)	As of March 31, 2012, 1.2 million of the SARs outstanding were unvested. The Company expects that substantially all of these unvested awards will vest in future periods.
(2)	Total SARs outstanding had an intrinsic value of $48.9 million. SARs vested and exercisable had an intrinsic value of $32.9 million.

Restricted Stock Units

Summary of Changes in Stock-Based Compensation Awards Outstanding

The following table summarizes the changes in RSUs outstanding during the three months ended March 31, 2012:

	Restricted Stock Units (RSUs) (in millions)			Per Share Weighted Average Grant Date Fair Value
Outstanding at December 31, 2011		3.1		$	21.53
Granted (1)		0.7			37.81
Vested and released		(1.3	)		19.18
Forfeited		—			—
Outstanding at March 31, 2012 (2), (3)		2.5		$	27.85

(1)	The 0.7 million RSUs granted in 2012 consisted of 0.3 million performance-based RSUs awarded to executives and 0.4 million service-based RSUs awarded to non-executive employees and certain board members. The 0.3 million performance-based RSUs awarded to executives represents the target amount of the award for the year, which is tied to an increase in the Company’s subscription-based Research contract value (“CV”) for 2012. The final number of performance-based RSUs that will be granted to executives in 2012 could range from 0% to 200% of the target amount, depending on the actual increase in CV for the year as measured on December 31, 2012. If the specified minimum level of achievement is not met, the performance-based RSUs will be forfeited in their entirety, and any compensation expense previously recorded will be reversed.
(2)	The Company expects that substantially all of the outstanding awards will vest in future periods.
(3)	The weighted-average remaining contractual term of the outstanding RSUs is approximately 1.6 years.

Common Stock Equivalents

Summary of Changes in Stock-Based Compensation Awards Outstanding

The following table summarizes the changes in CSEs outstanding during the three months ended March 31, 2012:

	Common Stock Equivalents (CSEs)			Per Share Weighted Average Grant Date Fair Value
Outstanding at December 31, 2011		97,268		$	15.93
Granted		2,905			43.09
Converted to common shares		(2,136	)		43.09
Outstanding at March 31, 2012		98,037		$	16.15

na=not available