Cardinal Health 2009 Annual Report Download - page 129

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The following summarizes all stock option transactions for the Company under the Plans from July 1, 2007
through June 30, 2009, giving retroactive effect to conversions of options in connection with acquisitions and
stock splits:
(in millions, except per share amounts)
Options
Outstanding
Weighted
Average
Exercise Price
per Common
Share
Weighted
Average
Remaining
Contractual
Life
in Years
Aggregate
Intrinsic
Value
Balance at June 30, 2007 ............................. 35.9 $56.91 5.3 $493.8
Granted .......................................... 3.1 66.51
Exercised ......................................... (4.5) 44.41
Canceled and forfeited ............................... (2.4) 64.52
Balance at June 30, 2008 ............................. 32.1 $58.81 4.6 $ 90.0
Granted .......................................... 2.3 54.35
Exercised ......................................... (1.1) 34.41
Canceled and forfeited ............................... (3.9) 59.58
Balance at June 30, 2009 ............................. 29.4 $59.25 3.9 $ 1.8
Exercisable at June 30, 2009 .......................... 23.9 58.80 3.6 $ 1.7
The following table provides data related to all stock option activity for the fiscal years ended June 30, 2009,
2008 and 2007:
(in millions, except per share data and years) 2009 2008 2007
Weighted-average grant date fair value per stock option ........................ $13.67 $17.82 $21.29
Aggregate intrinsic value of exercised options ............................... $ 14.0 $ 87.3 $175.6
Cash received upon exercise ............................................. $ 39.3 $227.9 $552.6
Tax benefit / (expense) realized related to exercise ............................ $ (2.9) $ 42.1 $ 29.9
Total compensation cost, net of estimated forfeitures, related to unvested stock
options not yet recognized, pre-tax ...................................... $ 54.3 $ 89.5 $103.0
Weighted-average period in years over which stock option compensation cost is
expected to be recognized ............................................. 1.4 1.9 2.8
The fair values of the options granted to the Company’s employees and directors during fiscal 2009, 2008
and 2007 were estimated on the date of grant using a lattice valuation model. The lattice valuation model
incorporates ranges of assumptions that are disclosed in the table below. The risk-free rate is based on the United
States Treasury yield curve at the time of the grant. The Company analyzed historical data to estimate option
exercise behaviors and employee terminations to be used within the lattice model. The Company calculated
separate option valuations for three separate groups of employees. The groups were determined using similar
historical exercise behaviors. The expected life of the options granted was calculated from the option valuation
model and represents the length of time in years that the options granted are expected to be outstanding. The
range of expected lives in the table below results from the separate groups of employees identified by the
Company based on their option exercise behaviors. Expected volatilities are based on implied volatility from
traded options on the Company’s Common Shares and historical volatility over a period of time commensurate
with the contractual term of the option grant (7 years). As required, the forfeiture estimates will be adjusted to
reflect actual forfeitures when an award vests. The actual forfeitures in future reporting periods could be higher
or lower than the Company’s current estimates. The following table provides the range of assumptions used for
options valued during fiscal 2009, 2008 and 2007:
2009 2008 2007
Risk-free interest rate ................................. 0.03% – 3.48% 2.1% – 4.8% 4.5% –5.1%
Expected life in years ................................. 4.5–7.0 4.4–7.0 5.7–7.0
Expected volatility ................................... 27.0% – 30.0% 27.0% 27.0%
Dividend yield ....................................... 1.00% – 2.33% 0.69% – 0.96% 0.50% – 0.69%
107