LabCorp 2011 Annual Report Download - page 42

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The following table shows a summary of nonvested shares
for the year ended December 31, 2011:
Weighted-
Average
Number of Grant Date
Shares Fair Value
Nonvested at January 1, 2011 0.6 $ 68.26
Granted 0.2 90.84
Vested (0.2) 73.02
Nonvested at December 31, 2011 0.6 74.39
As of December 31, 2011, there was $19.6 of total unrecog-
nized 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 1.6 years.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan, begun in
1997 and amended in 1999, 2004 and 2008, with 4.5 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 participating employees semi-
annually in January and July of each year. Approximately
0.2 shares were purchased by eligible employees in 2011,
2010 and 2009, respectively. For 2011, 2010 and 2009,
expense related to the Company’s employee stock purchase
plan was $2.7, $2.0 and $3.2, respectively.
The Company uses the Black-Scholes model to calculate
the fair value of the employee’s purchase right. The fair value
of the employee’s purchase right and the assumptions used
in its calculation are as follows:
2011 2010 2009
Fair value of the employee’s purchase right $ 15.58 $ 15.39 $ 14.28
Valuation assumptions
Risk free interest rate 0.1% 0.2% 0.2%
Expected volatility
0.2 0.2 0.2
Expected dividend yield – – –
15. Commitments and Contingent Liabilities
The Company is involved in a number of judicial, regulatory,
and arbitration proceedings (including those described below)
concerning matters arising in connection with the conduct of
the Company’s business activities. Many of these proceedings
are at preliminary stages, and many of these cases seek an
indeterminate amount of damages.
The Company records an aggregate legal reserve, which is
determined using actuarial calculations around historical loss
rates and assessment of trends experienced in settlements and
defense costs. In accordance with ASC 450 “Contingencies”,
the Company establishes reserves for judicial, regulatory, and
arbitration matters outside the aggregate legal reserve if and
when those matters present loss contingencies that are both
probable and estimable and would exceed the aggregate legal
reserve. When loss contingencies are not both probable and
estimable, the Company does not establish separate reserves.
The Company is unable to estimate a range of reasonably
possible loss for cases described below in which damages
either have not been specified or, in the Company’s judgment,
are unsupported and/or exaggerated and (i) the proceedings
are in early stages; (ii) there is uncertainty as to the outcome
of pending appeals or motions; (iii) there are significant factual
issues to be resolved; and/or (iv) there are novel legal issues
to be presented. For these cases, however, the Company
does not believe, based on currently available information,
that the outcomes of these proceedings will have a material
adverse effect on the Company’s financial condition, though
the outcomes could be material to the Company’s operating
results for any particular period, depending, in part, upon the
operating results for such period.
A subsidiary of the Company, DIANON Systems, Inc.
(“DIANON”), is the appellant in a wrongful termination lawsuit
originally filed by G. Berry Schumann in Superior Court in the
State of Connecticut. After a jury trial, the state court entered
judgment against DIANON, with total damages, attorney’s
fees, and pre-judgment interest payable by DIANON, of
approximately $10.0, plus post-judgment interest that continues
to accrue since the entry of judgment. DIANON has disputed
liability and has contested the case vigorously on appeal.
DIANON filed a notice of appeal in December 2009, and the
case was transferred to the Connecticut Supreme Court. The
Court heard oral argument on May 18, 2011 and the parties
await the Court’s decision on DIANON’s appeal.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements