LabCorp 2013 Annual Report Download - page 47

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The following table shows a summary of non-vested shares for
the year ended December 31, 2013:
Weighted-
Average
Number of Grant Date
Shares Fair Value
Non-vested at January 1, 2013 0.6 $ 84.91
Granted 0.5 90.19
Vested (0.2) 75.79
Canceled (0.1) 90.43
Non-vested at December 31, 2013 0.8 $ 90.70
As of December 31, 2013, there was $28.5 of total unrecognized
compensation cost related to non-vested 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 1.8 years.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan, begun in
1997 and amended in 1999, 2004, 2008 and 2012, with 6.3 shares
of common stock authorized for issuance. The plan permits sub-
stantially 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 2013, 2012 and 2011, respectively. For 2013, 2012 and
2011, expense related to the Company’s employee stock purchase
plan was $3.5, $4.9 and $2.7, 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:
2013 2012 2011
Fair value of the employee’s purchase right $ 17.22 $ 23.02 $ 15.58
Valuation assumptions
Risk-free interest rate 0.1% 0.1% 0.1%
Expected volatility 0.2 0.2 0.2
Expected dividend yield – – –
15. Commitments and Contingent Liabilities
The Company is involved from time to time in various claims and
legal actions, including arbitrations, class actions, and other litigation
(including those described in more detail below), arising in the
ordinary course of business. Some of these actions involve claims
that are substantial in amount. These matters include, but are not
limited to, intellectual property disputes, professional liability,
employee related matters, and inquiries, including subpoenas and
other civil investigative demands, from governmental agencies and
Medicare or Medicaid payers and managed care payers reviewing
billing practices or requesting comment on allegations of billing
irregularities that are brought to their attention through billing
audits or third parties. The Company receives civil investigative
demands or other inquiries from various governmental bodies in
the ordinary course of its business. Such inquiries can relate to
the Company or other healthcare providers. The Company works
cooperatively to respond to appropriate requests for information.
The Company is also named from time to time in suits brought
under the qui tam provisions of the False Claims Act and com-
parable state laws. These suits typically allege that the Company
has made false statements and/or certifications in connection with
claims for payment from federal or state health care programs. The
suits may remain under seal (hence, unknown to the Company) for
some time while the government decides whether to intervene on
behalf of the qui tam plaintiff. Such claims are an inevitable part of
doing business in the health care field today.
The Company believes that it is in compliance in all material
respects with all statutes, regulations and other requirements
applicable to its clinical laboratory operations. The clinical laboratory
testing industry is, however, subject to extensive regulation, and
the courts have not interpreted many of these statutes and regulations.
There can be no assurance therefore that those applicable statutes
and regulations will not be interpreted or applied by a prosecutorial,
regulatory or judicial authority in a manner that would adversely
affect the Company. Potential sanctions for violation of these statutes
and regulations include significant fines and the loss of various
licenses, certificates and authorizations.
LABORATORY CORPORATION OF AMERICA
Notes to Consolidated Financial Statements