Cardinal Health 2009 Annual Report Download - page 128

18. EMPLOYEE EQUITY AND SAVINGS PLANS
Employee Equity Plans
The Company maintains several stock incentive plans (collectively, the “Plans”) for the benefit of certain of
its officers, directors and employees. Employee options granted under the Plans during fiscal 2007 generally vest
in equal annual installments over four years and are exercisable for periods up to seven years from the date of
grant at a price equal to the fair market value of the Common Shares underlying the option at the date of grant.
Employee options granted under the Plans during fiscal 2009 and 2008 generally vest in equal annual
installments over three years and are exercisable for periods up to seven years from the date of grant at a price
equal to the fair market value of the Common Shares underlying the option at the date of grant. Under the Plans,
the Company currently utilizes for equity award grants, the Company was authorized to grant up to 29.8 million
shares as of June 30, 2009, of which 16.1 million shares have been granted. Employee restricted shares and
restricted share units granted under the Plans during fiscal 2009, 2008 and 2007 generally vest in equal
installments over three years and entitle holders to dividends or cash dividend equivalents. Restricted shares and
restricted share units that were awarded after August 1, 2006 accrue dividends or cash dividend equivalents that
are payable upon vesting of the awards.
The following table illustrates the impact of equity-based compensation on reported amounts:
Fiscal Year Ended June 30,
2009 2008 2007
(in millions, except per share amounts)
As
Reported
Impact of
Equity-Based
Compensation
As
Reported
Impact of
Equity-Based
Compensation
As
Reported
Impact of
Equity-Based
Compensation
Operating earnings (1)(2)(3) ..... $1,885.7 $(122.8) $2,091.5 $(122.3) $1,346.8 $(138.1)
Earnings from continuing
operations .................. $1,142.8 $ (81.8) $1,296.0 $ (81.0) $ 820.7 $ (90.0)
Net earnings .................. $1,151.6 $ (81.8) $1,300.6 $ (81.0) $1,931.1 $(114.0)
Net basic earnings per Common
Share ...................... $ 3.22 $ (0.23) $ 3.63 $ (0.23) $ 4.89 $ (0.29)
Net diluted earnings per Common
Share ...................... $ 3.18 $ (0.23) $ 3.57 $ (0.22) $ 4.77 $ (0.28)
(1) The total equity-based compensation expense for fiscal years ended June 30, 2009, 2008 and 2007 includes
gross restricted share and restricted share unit expense of approximately $65.6 million, $57.7 million and
$36.2 million respectively, gross employee option expense of approximately $46.7 million, $60.1 million
and $88.4 million, respectively, gross employee stock purchase plan expense of approximately
$12.6 million, $11.1 million and $9.5 million, respectively, and gross stock appreciation right (income)/
expense of ($2.1) million, ($6.6) million and $4.0 million, respectively.
(2) Equity-based compensation charged to discontinued operations was approximately $24.0 million, net of tax
benefits of $12.5 million, during the fiscal year ended June 30, 2007.
(3) Fiscal 2008 equity-based compensation expense includes approximately $8.7 million related to unvested
equity awards held by the former Executive Director of the Company. The acceleration of the equity-based
compensation expense resulted from a change in status from an employee to a nonemployee director.
Stock Options
The fair values of options granted after the Company adopted SFAS No. 123(R) were determined using a
lattice valuation model. The Company believes the lattice model provides for better estimates because it has the
ability to take into account employee exercise patterns based on changes in the Company’s stock price and other
variables and it provides for a range of input assumptions.
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