Cardinal Health 2012 Annual Report Download - page 46

Cardinal Health, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
44
ranging from seven to ten years from the date of grant. All employee stock
options are exercisable at a price equal to the market value of the Common
Shares underlying the option at the date of grant.
The following summarizes all stock option transactions under the Plans
from June 30, 2010 through June 30, 2012:
(in millions, except per share
amounts)
Stock Options
Outstanding
Weighted Average Exercise
Price per Common Share
Balance at June 30, 2010 24 $ 37.88
Granted 4 31.07
Exercised (3) 30.16
Canceled and forfeited (2) 43.34
Balance at June 30, 2011 23 $ 37.02
Granted 2 41.58
Exercised (2) 30.26
Canceled and forfeited (2) 47.19
Balance at June 30, 2012 21 $ 37.29
Exercisable at June 30, 2012 15 $ 38.80
The following table provides data related to all stock option activity for
fiscal 2012, 2011 and 2010:
(in millions, except per share amounts) 2012 2011 2010
Weighted-average grant date fair value per stock option $ 9.26 $ 6.40 $ 6.44
Aggregate intrinsic value of exercised options 27 26 7
Aggregate intrinsic value of outstanding options at period end 137 217 57
Cash received upon exercise 42 63 40
Cash tax disbursements realized related to exercise (4) (14) (16)
Total compensation cost, net of estimated forfeitures, related
to unvested stock options not yet recognized, pre-tax 25 29 32
Weighted-average period over which stock option
compensation cost is expected to be recognized in years 222
Weighted-average remaining contractual life in years 344
The fair values of the stock options granted to our employees and directors
during fiscal 2012, 2011 and 2010 were estimated on the date of grant
using a lattice valuation model. We believe the lattice model provides
reasonable estimates because it has the ability to take into account
individual exercise patterns based on changes in our stock price and other
variables and it provides for a range of input assumptions, which are
disclosed in the table below. The risk-free rate is based on the United
States Treasury yield curve at the time of the grant. We analyzed historical
data to estimate option exercise behaviors and employee terminations to
be used within the lattice model. The expected life of the options granted
was calculated from the option valuation model and represents the length
of time in years that the options granted are expected to be outstanding.
Expected volatilities are based on implied volatility from traded options on
our Common Shares and historical volatility over a period of time
commensurate with the contractual term of the option grant (up to ten
years). The following table provides the range of assumptions used for
options valued during fiscal 2012, 2011 and 2010:
2012 2011 2010
Risk-free interest rate 1.2% -1.3% 1.2% - 1.7% 1.9% - 2.5%
Expected volatility 29% 27% - 32% 32%
Dividend yield 2.0% -2.1% 2.2% - 2.5% 2.0% -2.8%
Expected life in years 654-5
Restricted Shares and Restricted Share Units
Restricted shares and restricted share units granted under the Plans
generally vest in equal installments over three years. The fair value is
determined by the grant date market price of our Common Shares.
Restricted shares and restricted share units accrue dividends or cash
dividend equivalents that are payable upon vesting of the awards.
The following table summarizes all transactions related to restricted shares
and restricted share units under the Plans from June 30, 2010 through
June 30, 2012:
(in millions, except per share amounts) Shares
Weighted Average
Grant Date Fair
Value per Share
Nonvested at June 30, 2010 3 $ 33.33
Granted 2 31.42
Vested (1) 36.11
Canceled and forfeited — —
Nonvested at June 30, 2011 4 $ 31.31
Granted 2 41.67
Vested (2) 32.50
Canceled and forfeited — —
Nonvested at June 30, 2012 4 $ 35.46
The following table provides data related to all restricted share and
restricted share unit activity for fiscal 2012, 2011 and 2010:
(in millions) 2012 2011 2010
Total compensation cost, net of estimated forfeitures,
related to nonvested restricted share and share unit
awards not yet recognized, pre-tax $67$56$58
Weighted-average period in years over which restricted
share and share unit cost is expected to be recognized 222
Performance Share Units
Beginning in fiscal 2012, performance share units were granted under the
Plans, which represent Common Shares potentially issuable in the future.
Performance share units generally vest over two-year and three-year
performance periods based on achievement of specific performance
goals. Based on the extent to which the targets are achieved, vested
shares may range from 0 percent to 200 percent of the target award
amount. The fair value of performance share units is determined by the
grant date market price of our Common Shares and the compensation
expense associated with nonvested performance share units is dependent
on our periodic assessment of the probability of the targets being achieved
and our estimate of the number of shares that will ultimately be issued.
Performance share units accrue cash dividend equivalents that are
payable upon vesting of the awards.
The following table summarizes information related to performance share
units under the Plans (based on target award amounts) from June 30,
2011 through June 30, 2012:
(in millions, except per share
amounts)
Performance
Share Units
Weighted Average Grant Date
Fair Value per Share
Nonvested at June 30, 2011 — $ —
Granted 1 42.60
Vested — —
Canceled and forfeited — —
Nonvested at June 30, 2012 1 $ 42.60
The following table provides data related to all performance share unit
activity for fiscal 2012, 2011 and 2010:
(in millions) 2012
Total compensation cost, net of estimated forfeitures, related to nonvested
performance share units not yet recognized, pre-tax $12
Weighted-average period in years over which performance share unit cost is
expected to be recognized 2