LabCorp 2009 Annual Report Download - page 57

LABORATORY CORPORATION OF AMERICA 55
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
$ 6.80 – 59.37 1.7 4.8 $49.09 1.7 $49.09
$ 60.04 – 67.60 1.9 9.1 $60.29 – $ –
$ 75.63 – 75.63 1.6 8.4 $75.63 0.6 $75.63
$ 77.58 – 80.37 1.1 7.2 $80.30 0.7 $80.32
6.3 7.4 $64.52 3.0 $61.57
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements
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:
2009 2008 2007
Fair value per option $ 10.85 $ 13.25 $ 14.84
Valuation assumptions
Weighted-average expected life (in years) 3.0 3.2 3.1
Risk-free interest rate 1.1% 2.7% 4.7%
Expected volatility 0.2 0.2 0.2
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. government 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 valua-
tion purposes. For 2009, 2008 and 2007, expense related to
the Company’s stock option plan totaled $18.7, $17.3 and
$14.5, respectively. The 2008 expense amount includes
$0.8 related to the acceleration of the recognition of stock
compensation as a result of EVP retirement.
Restricted Stock and Performance Shares
The Company grants restricted stock and performance
shares (“nonvested shares”) to officers, key employees and
non-employee directors under all plans. Restricted stock
becomes vested annually in equal one-third increments beginning
on the first anniversary of the grant. The performance share
awards represented a three-year award opportunity for the
period 2005-2007 and became vested in 2008. A performance
share grant in 2008 represents a three-year award opportunity
for the period 2008-2010 and becomes vested in the first
quarter of 2011. A performance share grant in 2009 represents
a three-year award opportunity for the period of 2009-2011
and becomes vested in the first quarter of 2012. 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 2009, 2008 and 2007, total
restricted stock and performance share compensation expense
was $13.6, $14.0 and $16.7, respectively. The 2008 expense
amount includes $1.2 related to the acceleration of the recog-
nition of stock compensation as a result of EVP retirement.
Prior to May 2008, the fair value of restricted stock and
performance share awards was determined based on the
closing price of the Company’s common stock on the day
immediately preceding the grant date. For restricted stock
and performance share awards granted after May 2008, the
fair value of the awards is determined based on the closing
price of the Company’s common stock on the day of the grant.
The following table shows a summary of nonvested shares
for the year ended December 31, 2009:
Weighted-
Average
Number of Grant Date
Shares Fair Value
Nonvested at January 1, 2009 0.4 $76.04
Granted 0.3 60.48
Vested (0.1) 69.23
Adjustments (0.1) 67.99
Nonvested at December 31, 2009 0.5 69.43