Danaher 2011 Annual Report Download - page 103

Table of Contents
The Black-Scholes model incorporates assumptions to value stock-based awards. The risk-free rate of interest for periods within the contractual life of the
option is based on a zero-coupon U.S. government instrument whose maturity period equals or approximates the option’s expected term. Expected volatility is
based on implied volatility from traded options on the Company’s stock and historical volatility of the Company’s stock. The dividend yield is calculated by
dividing the Company’s annual dividend, based on the most recent quarterly dividend rate, by the closing stock price on the grant date. To estimate the option
exercise timing to be used in the valuation model, in addition to considering the vesting period and contractual term of the option, the Company analyzes and
considers actual historical exercise experience for previously granted options. The Company stratifies its employee population into multiple groups for option
valuation and attribution purposes based upon distinctive patterns of forfeiture rates and option holding periods.
The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are ultimately expected to vest. The
Company estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual
forfeitures differ from those estimates. Ultimately, the total expense recognized over the vesting period will equal the fair value of awards that actually vest.
The following table summarizes the components of the Company’s share-based compensation program recorded as expense ($ in millions):

  
Restricted Stock Units & Restricted Shares:
Pre-tax compensation expense $ 47.9 $32.2 $29.1
Tax benefit (17.8) (12.0) (10.8)
Restricted stock unit and restricted share expense, net of tax $30.1 $20.2 $18.3
Stock Options:
Pre-tax compensation expense $47.7 $55.9 $58.2
Tax benefit (14.6) (16.5) (18.0)
Stock option expense, net of tax $33.1 $39.4 $40.2
Total Share-Based Compensation:
Pre-tax compensation expense $95.6 $ 88.1 $87.3
Tax benefit (32.4) (28.5) (28.8)
Total share-based compensation expense, net of tax $ 63.2 $59.6 $58.5
Share-based compensation has been recognized as a component of selling, general and administrative expenses in the accompanying Consolidated Statements
of Earnings. As of December 31, 2011, $118 million of total unrecognized compensation cost related to RSUs and restricted shares is expected to be
recognized over a weighted average period of approximately 2 years. As of December 31, 2011, $126 million of total unrecognized compensation cost related to
stock options is expected to be recognized over a weighted average period of approximately 2 years. Both amounts will be adjusted for any future changes in
estimated forfeitures.
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Source: DANAHER CORP /DE/, 10-K, February 24, 2012 Powered by Morningstar® Document Research℠
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