Invacare 2011 Annual Report Download - page 99

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INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Shareholders’ Equity Transactions—Continued
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:
2011 2010 2009
Expected dividend yield ............................................ 0.2% 0.21% 0.21%
Expected stock price volatility ....................................... 37.3% 39.6% 39.9%
Risk-free interest rate .............................................. 1.11% 1.57% 1.81%
Expected life in years .............................................. 5.9 3.9 3.7
Forfeiture percentage .............................................. 6.9% 10.5% 12.7%
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 2011, 2010 and 2009 was $8.88, $7.83 and $6.84, respectively. The weighted-average remaining
contractual life of options outstanding at December 31, 2011, 2010 and 2009 was 5.7, 5.8 and 5.5 years,
respectively. The weighted-average contractual life of options exercisable at December 31, 2011 was 4.2 years.
The total intrinsic value of stock awards exercised in 2011, 2010 and 2009 was $1,429,000, $1,928,000 and
$962,000, respectively. As of December 31, 2011, the intrinsic value of all options outstanding and of all options
exercisable was $49,000 and $47,000, respectively.
The exercise of stock awards in 2011, 2010 and 2009 resulted in cash received by the company totaling
$4,139,000, $2,912,000 and $1,628,000 for each period, respectively with no tax benefits for any period. The
total fair value of awards vested during 2011, 2010 and 2009 was $4,362,000, $5,261,000 and $1,716,000,
respectively.
As of December 31, 2011, there was $16,031,000 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 $5,227,000 related to restricted stock awards. The company expects the compensation expense to be
recognized over a weighted-average period of approximately two years. Prior to the adoption of ASC 718,
Compensation—Stock Compensation, 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 ASC 718, any 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
to acquire, or commences a tender offer to acquire, shares representing 30% or more of the company’s
outstanding voting power, subject to deferral by the Board of Directors. After the Rights become exercisable,
under certain circumstances, the Rights may be exercisable to purchase Common Shares of the company, or
common shares of an acquiring company, at a price equal to the exercise price of the Right divided by 50% of the
then current market price per Common Share or acquiring company common share, as the case may be. The
Rights will expire on July 18, 2015 unless previously redeemed or exchanged by the company. The company
may redeem and terminate the Rights in whole, but not in part, at a price of $0.001 per Right at any time prior to
10 days following a public announcement that an Acquiring Party has acquired beneficial ownership of shares
representing 30% or more of the company’s outstanding voting power, and in certain other circumstances
described in the Rights Agreement.
FS-27