LabCorp 2007 Annual Report Download - page 51

Notes to Consolidated Financial Statements
(Dollars and shares in millions, except per share data)
Laboratory Corporation of America® Holdings 2007 49
The following table summarizes information concerning currently outstanding and exercisable options.
Options Outstanding Options Exercisable
Weighted Average Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
$ 4.84 – 39.34 1.0 5.2 $35.38 1.0 $35.38
$ 40.50 – 49.93 1.2 6.0 $46.23 0.9 $45.61
$ 58.57 – 58.57 1.1 8.2 $58.57 0.3 $58.57
$ 59.37 – 80.37 1.4 9.2 $80.21 – $71.56
4.7 7.3 $56.71 2.2 $42.69
The following table shows the weighted average grant-date fair
values of options and the weighted average assumptions that the
Company used to develop the fair value estimates:
2007 2006 2005
Fair value per option $14.84 $12.24 $15.62
Valuation assumptions
Weighted average expected life (in years) 3.1 3.1 3.1
Risk free interest rate 4.7% 4.3% 4.4%
Expected volatility 0.2 0.2 0.4
Expected dividend yield 0.0% 0.0% 0.0%
The Black Scholes model incorporates assumptions to value
stock-based awards. The risk-free interest rate for periods within the
contractual life of the option is based on a zero-coupon U.S. govern-
ment instrument over the contractual term of the equity instrument.
Expected volatility of the Company’s stock is based on historical
volatility of the Company’s stock. The Company uses historical data
to calculate the expected life of the option. Groups of employees
and non-employee directors that have similar exercise behavior with
regard to option exercise timing and forfeiture rates are considered
separately for valuation purposes. For 2007 and 2006, expense
related to the Company’s stock option plan totaled $14.5 and
$21.0, respectively.
Restricted Stock and Performance Shares
The following table summarizes grants of restricted stock and
performance shares (“nonvested shares”) made by the Company to offi cers,
key employees, and non-employee directors under all plans. Restricted
stock becomes vested annually in equal one third increments beginning
on the fi rst anniversary of the grant. The performance share awards
represent a three year award opportunity for the period 2005-2007
and become vested in 2008. Performance share awards are subject
to certain earnings per share and revenue targets, the achievement
of which may increase or decrease the number of shares which the
grantee receives upon vesting. The unearned restricted stock and
performance share compensation is being amortized to expense
over the applicable vesting periods. For 2007, 2006 and 2005, total
restricted stock and performance share compensation expense was
$16.7, $17.7 and $13.7, respectively.
The fair value of restricted stock and performance share awards
is determined based on the closing price of the Company’s common
stock on the day immediately preceding the grant date.
The following table shows a summary of nonvested shares for the
year ended December 31, 2007:
Weighted-
Average
Number of Grant Date
Shares Fair Value
Nonvested at January 1, 2007 1.3 $48.02
Granted 0.1 80.25
Vested (0.2) 46.97
Nonvested at December 31, 2007 1.2 52.16
As of December 31, 2007, there was $14.2 of total unrecognized
compensation cost related to nonvested restricted stock and performance
share-based compensation arrangements granted under the stock
incentive plans. That cost is expected to be recognized over a weighted
average period of 1.5 years.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan, begun in 1997
and amended in 1999 and 2004, with 4.5 million shares of common
stock authorized for issuance. The plan permits substantially all
employees to purchase a limited number of shares of Company stock
at 85% of market value. The Company issues shares to participat-
ing employees semi-annually in January and July of each year.
Approximately 174, 207, and 209 thousand shares were purchased
by eligible employees in 2007, 2006 and 2005 respectively. For
2007 and 2006, expense related to the Company’s employee stock
purchase plan was $2.8 and $2.3, respectively.
Laboratory Corporation of America