ADP 2009 Annual Report Download - page 56

Summarized information about stock options outstanding as of June 30, 2009 is as follows:
In fiscal 2009, the Company issued 1.5 million shares in connection with the employee stock purchase plan offering that vested on December
31, 2008. The Company expects to issue approximately 1.8 million shares for the employee stock purchase plan offering that vests on
December 31, 2009. In addition, in fiscal 2009, the Company issued 2.2 million shares of restricted stock.
The fair value of each stock option issued prior to January 1, 2005 was estimated on the date of grant using a Black-Scholes option pricing
model. For stock options issued on or after January 1, 2005, the fair value of each stock option was estimated on the date of grant using a
binomial option pricing model. The binomial model considers a range of assumptions related to volatility, risk-free interest rate and employee
exercise behavior. Expected volatilities utilized in the binomial model are based on a combination of implied market volatilities, historical
volatility of the Company’ s stock price and other factors. Similarly, the dividend yield is based on historical experience and expected future
changes. The risk-free rate is derived from the U.S. Treasury yield curve in effect at the time of grant. The binomial model also incorporates
exercise and forfeiture assumptions based on an analysis of historical data. The expected life of the stock option grant is derived from the
output of the binomial model and represents the period of time that options granted are expected to be outstanding.
The fair value for stock options granted was estimated at the date of grant with the following assumptions:
B. Pension Plans. The Company has a defined benefit cash balance pension plan covering substantially all U.S. employees, under which
employees are credited with a percentage of base pay plus interest. The plan interest credit rate will vary from year-to-year based on the ten-
year U.S. Treasury rate. Employees are fully vested on completion of three years of service. The Company's policy is to make contributions
within the range determined by generally accepted actuarial principles. In addition, the Company has various retirement plans for its non-U.S.
employees and maintains a Supplemental Officer Retirement Plan (“SORP”). The SORP is a defined benefit plan pursuant to which the
Company will pay supplemental pension benefits to certain key officers upon retirement based upon the officers’ years of service and
compensation.
A June 30 measurement date was used in determining the Company’ s benefit obligations and fair value of plan assets.
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Outstanding Exercisable
Weighted Weighted
Exercise Number Remaining Average Number Remaining Average
Price of Options Life Price of Options Life Price
Range (in thousands) (in years) (in dollars) (in thousands) (in years) (in dollars)
Under $15 - - $ - - - $ -
$15 to $25 1 0.4 $ 21 1 0.4 $21
$25 to $35 3,674 3.6 $ 31 3,630 3.6 $ 31
$35 to $45 33,065 5.0 $ 40 25,638 4.3 $ 40
$45 to $55 8,580 2.1 $ 50 8,049 1.7 $ 50
45,320 4.3 $ 41 37,318 3.7 $ 41
Years ended June 30, 2009 2008 2007
Risk-free interest rate 1.8% - 3.1% 2.8% - 4.6% 4.6% - 5.0%
Dividend yield 2.6% - 3.5% 1.7% - 2.7% 1.6% - 1.7%
Weighted average volatility factor 25.3% - 31.3% 22.8% - 25.6% 18.4% - 24.7%
Weighted average expected life (in years) 5.0 5.0 4.9 - 5.6
Weighted average fair value (in dollars):
Stock options $ 7.54 $ 8.31 $ 10.77
Stock purchase plan $ - $11.99 $11.24
Performance-based restricted stock $ 39.04 $ 44.61 $ 40.99