ADP 2010 Annual Report Download - page 74

The aggregate intrinsic value of stock options outstanding and exercisable as of June 30, 2010 was $52.9 million and $50.2 million,
respectively, and the aggregate intrinsic value for stock options exercised in fiscal 2010 was $29.1 million.
Summarized information about stock options outstanding as of June 30, 2010 is as follows:
In fiscal 2010, the Company issued 1.4 million shares in connection with the final compensatory employee stock purchase plan
offering that vested on December 31, 2009.
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:
The weighted average fair values of stock plan issuances were as follows (in dollars):
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 Officers 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.
57
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 $25
-
-
$
-
-
-
$
-
$25 to $35
2,370
2.6
$
31
2,370
2.6
$
31
$35 to $45
26,130
4.6
$
40
21,232
3.9
$
40
$45 to $55
6,500
1.4
$
50
6,179
1.1
$
50
35,000
3.9
$
41
29,781
3.3
$
41
Years ended June 30,
2010
2009
2008
Risk - free interest rate
2.3% - 2.6%
1.8% - 3.1%
2.8% - 4.6%
Dividend yield
3.2% - 3.4%
2.6% - 3.5%
1.7% - 2.7%
Weighted average volatility factor
25.9% - 30.4%
25.3% - 31.3%
22.8% - 25.6%
Weighted average expected life (in years)
5.0 - 5.1
5.0
5.0
Years ended June 30,
2010
2009
2008
Stock options
$
7.05
$
7.54
$
8.31
Stock purchase plan
$
-
$
-
$
11.99
Performance - based restricted stock
$
41.95
$
39.04
$
44.61