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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-26
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions:
2013 2012 2011
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.4% 0.4% 0.2%
Expected stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.2% 41.0% 37.3%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.82% 0.94% 1.11%
Expected life in years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 6.0 5.9
Forfeiture percentage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2% 7.6% 6.9%
Expected stock price volatility is calculated at each date of grant based on historical stock prices for a period of time
commensurate with the expected life of the option. The weighted-average fair value of options granted during 2013, 2012 and
2011 was $5.33, $5.14 and $8.88, respectively. The weighted-average remaining contractual life of options outstanding at
December 31, 2013, 2012 and 2011 was 5.8, 5.8 and 5.7 years, respectively. The weighted-average contractual life of options
exercisable at December 31, 2013 was 4.4 years. The total intrinsic value of stock awards exercised in 2013, 2012 and 2011 was
$158,000, $41,000 and $1,429,000, respectively. As of December 31, 2013, the intrinsic value of all options outstanding and of
all options exercisable was $14,144,000 and $3,252,000, respectively.
The exercise of stock awards in 2013, 2012 and 2011 resulted in cash received by the Company totaling $512,000, $0 and
$4,139,000 for each period, respectively with no tax benefits for any period. The total fair value of awards vested during 2013,
2012 and 2011 was $3,778,000, $4,398,000 and $4,362,000, respectively.
As of December 31, 2013, there was $11,975,000 of total unrecognized compensation cost from stock-based compensation
arrangements granted under the Plans, which is related to non-vested options and shares, which includes $3,705,000 related to
restricted stock awards. The Company expects the compensation expense to be recognized over a weighted-average period of
approximately two years. Prior to the adoption of ASC 718, Compensation—Stock Compensation, the Company presented all tax
benefit deductions resulting from the exercise of stock options as a component of operating cash flows in the Consolidated Statement
of Cash Flows. In accordance with ASC 718, any tax benefits resulting from tax deductions in excess of the compensation expense
recognized for those options is classified as a component of financing cash flows.
Effective July 8, 2005, the Company adopted a new Rights Agreement to replace the Company’s previous shareholder rights
plan, which expired on July 7, 2005. In order to implement the new Rights Agreement, the Board of Directors declared a dividend
of one Right for each outstanding share of the Company’s Common Shares and Class B Common Shares to shareholders of record
at the close of business on July 19, 2005. Each Right entitles the registered holder to purchase from the Company one one-thousandth
of a Series A Participating Serial Preferred Share, without par value, at a Purchase Price of $180.00 in cash, subject to adjustment.
The Rights will not become exercisable until after a person (an “Acquiring ”) has acquired, or obtained the right to acquire, or
commences a tender offer to acquire, shares representing 30% or more of the Company’s outstanding voting power, subject to
deferral by the Board of Directors. After the Rights become exercisable, under certain circumstances, the Rights may be exercisable
to purchase Common Shares of the Company, or common shares of an acquiring Company, at a price equal to the exercise price
of the Right divided by 50% of the then current market price per Common Share or acquiring Company common share, as the
case may be. The Rights will expire on July 18, 2015 unless previously redeemed or exchanged by the Company. The Company
may redeem and terminate the Rights in whole, but not in part, at a price of $0.001 per Right at any time prior to 10 days following
a public announcement that an Acquiring Party has acquired beneficial ownership of shares representing 30% or more of the
Company’s outstanding voting power, and in certain other circumstances described in the Rights Agreement.