AmerisourceBergen 2005 Annual Report Download - page 47

AmerisourceBergen Corporation 2005
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Note 9. Stock Compensation Plans
Stock Option Plans
In accordance with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company elected to account for stock-based compensation
under APB No. 25 and its related interpretations for these plans until its adoption of SFAS No. 123R. Under APB 25, generally, when the exercise
price of the Company’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is
recognized.
The Company currently has seven employee stock option plans that provide for the granting of incentive and nonqualified stock options to
acquire shares of Common Stock to employees at a price not less than the fair market value of the Common Stock on the date the option is
granted. Option terms and vesting periods are determined at the date of grant by a committee of the board of directors. Options generally vest over
four years and expire in ten years. The Company also has six non-employee director stock option plans that provide for the granting of nonqualified
stock options to acquire shares of Common Stock to non-employee directors at the fair market value of the Common Stock on the date of the grant.
Vesting periods for the non-employee director plans range from immediate vesting to three years and options expire in ten years.
At September 30, 2005, there were outstanding options to purchase 8.1 million shares of Common Stock under the aforementioned plans.
Options for an additional 0.9 million shares may be granted under one of the employee stock option plans and options for an additional 0.2 million
shares may be granted under one of the non-employee director stock option plans.
All outstanding stock options granted prior to February 15, 2001 under the above plans became fully vested in August 2001, and generally
became exercisable in August 2002. As a result of the accelerated vesting of stock options, the Company recorded a charge of $0.3 million,
$1.0 million and $1.1 million in fiscal 2005, 2004, and 2003, respectively. These charges were recorded within distribution, selling and
administrative expenses in the accompanying consolidated statements of operations.
Effective September 1, 2004, the Company vested all employee options then outstanding with an exercise price in excess of $54.10 (the
closing stock price on August 31, 2004). The accelerated vesting was approved by the Compensation and Succession Planning Committee of the
Company’s board of directors for employee retention purposes and in anticipation of the requirements of SFAS No. 123R. In accordance with APB
No. 25, the Company did not incur a charge related to this accelerated vesting because the exercise price of all the accelerated options was greater
than $54.10.
Asummary of the Company’s stock option activity and related information for its option plans for the fiscal years ended September 30, 2005,
2004 and 2003 were as follows:
2005 2004 2003
Weighted Weighted Weighted
Average Average Average
Options Exercise Options Exercise Options Exercise
(000’s) Price (000’s) Price (000’s) Price
Outstandingat beginning of year 9,402 $57 8,255 $56 7,801 $53
Granted 2,134 62 2,405 58 2,430 56
Exercised (3,187) 55 (433) 35 (1,385) 33
Forfeited (287) 66 (825) 62 (591) 67
Outstanding at end of year 8,062 $59 9,402 $57 8,255 $56
Exercisable at end of year 5,962 $57 9,249 $57 3,616 $49
Asummary ofthestatus ofoptionsoutstandingat September 30, 2005 follows:
Outstanding Options Exercisable Options
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Exercise price Range (000’s) Life Price (000’s) Price
$12 – $50 998 4 years $33 998 $33
$51 – $60 2,564 8years 56 2,492 56
$61 – $65 2,888 8 years 63 860 64
$66 – $70 1,512 6years 70 1,512 70
$71 – $103 100 5 years 81 100 81
Total 8,062 7 years $59 5,962 $57