Invacare 2008 Annual Report Download - page 92

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Shareholders’ Equity Transactions—Continued
date granted and options must be exercised within ten years from the date granted. Accordingly, the assumption
regarding the stock options issued in 2008, 2007 and 2006 was that 25% of such options vested in the year
following issuance. The stock options awarded during such years provided a four-year vesting period whereby
options vest equally in each year. The 2008, 2007 and 2006 expense may be adjusted for forfeitures of awards
that will not vest because service or employment requirements have not been met.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
2008 2007 2006
Expected dividend yield ......................................... .21% .20% .93%
Expected stock price volatility .................................... 31.5% 29.2% 29.5%
Risk-free interest rate ........................................... 2.65% 4.31% 4.71%
Expected life in years ........................................... 3.7 3.9 4.4
Forfeiture percentage ........................................... 5.7% 8.0% 16.5%
Expected stock price volatility is calculated at each date of grant based on historical stock prices for a period
of time commensurate with the expected life of the option. The weighted-average fair value of options granted
during 2008, 2007 and 2006 was $6.91, $7.01 and $7.87, respectively. The weighted-average remaining
contractual life of options outstanding at December 31, 2008, 2007 and 2006 was 5.0, 5.0 and 5.3 years,
respectively. The weighted-average contractual life of options exercisable at December 31, 2008 was 3.6 years.
The total intrinsic value of stock awards exercised in 2008, 2007 and 2006 was $263,000, $3,000 and $1,792,170,
respectively. As of December 31, 2008, the intrinsic value of all options outstanding and of all options
exercisable was $112,000 and zero, respectively.
The exercise of stock awards in 2008, 2007 and 2006 resulted in cash received by the company totaling
$834,000, $44,000 and $2,364,000 for each period, respectively with no tax benefits for any period. The total fair
value of awards vested during 2008, 2007 and 2006 was $1,771,000, $975,000 and zero, respectively. The
vesting amount in 2006 was zero as vesting occurs 25% annually, thus none of the 2006 grants vested during
2006 and there were no previous grants to vest due to the acceleration of vesting of previous awards in 2005.
As of December 31, 2008, there was $12,599,000 of total unrecognized compensation cost from stock-based
compensation arrangements granted under the plans, which is related to non-vested options and shares, which
includes $4,505,000 related to restricted stock awards. The company expects the compensation expense to be
recognized over a weighted-average period of approximately 2 years. Prior to the adoption of SFAS 123R, the
company presented all tax benefit deductions resulting from the exercise of stock options as a component of
operating cash flows in the Consolidated Statement of Cash Flows. In accordance with SFAS 123R, tax benefits
resulting from tax deductions in excess of the compensation expense recognized for those options is classified as
a component of financing cash flows.
Effective July 8, 2005, the company adopted a new Rights Agreement to replace the company’s previous
shareholder rights plan, which expired on July 7, 2005. In order to implement the new Rights Agreement, the
Board of Directors declared a dividend of one Right for each outstanding share of the company’s Common
Shares and Class B Common Shares to shareholders of record at the close of business on July 19, 2005. Each
Right entitles the registered holder to purchase from the company one one-thousandth of a Series A Participating
Serial Preferred Share, without par value, at a Purchase Price of $180.00 in cash, subject to adjustment. The
Rights will not become exercisable until after a person (an “Acquiring Party”) has acquired, or obtained the right
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