Annual report pursuant to Section 13 and 15(d)

Stock Incentive Plans

v2.4.0.6
Stock Incentive Plans
12 Months Ended
Dec. 31, 2011
Stock Incentive Plans [Abstract]  
Stock Incentive Plans

15. Stock Incentive Plans

The Company's stock incentive plans allow for the granting of restricted stock or restricted stock unit awards and options to purchase common stock. Both incentive stock options and nonqualified stock options can be awarded under the plans. No option will be exercisable for longer than ten years after the date of grant. The plans have 1,000,141 shares available for future awards. Compensation expense for stock options and restricted stock unit awards is recognized on a straight-line basis over the vesting period, generally three to five years for stock options and one to ten years for restricted stock or restricted stock unit awards. Certain restricted stock unit awards contain performance-based as well as service-based provisions. Certain awards provide for accelerated vesting if there is a change in control as defined in the plans. The total compensation cost that has been charged against income for the stock incentive plans was $18,171, $13,874 and $14,634 for the years ended December 31, 2011, 2010 and 2009, respectively. The total income tax benefit recognized in the income statement for stock-based compensation arrangements was $5,804, $4,713 and $3,945 for the years ended December 31, 2011, 2010 and 2009, respectively.

Option activity for the year ended December 31, 2011 is summarized below:

 

     Shares     Weighted Average
Exercise Price
     Aggregate
Intrinsic Value
     Weighted
Average Remaining
Contractual Term
 

Outstanding as of December 31, 2010

     3,138,521     $ 20.71         

Granted

     10,000       31.39         

Exercised

     (914,859 )     20.65         

Forfeited

     (37,100 )     23.73         
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of December 31, 2011

     2,196,562     $ 20.75       $ 41,393         3.9   
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable as of December 31, 2011

     2,000,662       20.68       $ 37,837         3.6   
  

 

 

   

 

 

    

 

 

    

 

 

 

 

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:

 

     Year Ended December 31,  
     2011     2010     2009  

Expected life (in years)

     5.2       5.8       5.8  

Risk-free interest rate

     0.9 %     2.7 %     2.2 %

Expected volatility

     49.9 %     48.2 %     50.9 %

Expected dividend yield

     0 %     0 %     0 %

For the years ended December 31, 2011, 2010 and 2009, the Company used a projected expected life for each award granted based on historical experience of employees' exercise behavior. The expected volatility is primarily based on historical volatility levels along with the implied volatility of exchange traded options to purchase Centene common stock. The risk-free interest rates are based on the implied yield currently available on U.S. Treasury instruments with a remaining term equal to the expected life.

Other information pertaining to option activity is as follows:

 

     Year Ended December 31,  
     2011      2010      2009  

Weighted-average fair value of options granted

   $ 13.94      $ 11.60      $ 8.76  

Total intrinsic value of stock options exercised

   $ 11,744      $ 1,999      $ 2,192  

A summary of the Company's non-vested restricted stock and restricted stock unit shares as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:

 

     Shares     Weighted
Average
Grant Date
Fair Value
 

Non-vested balance as of December 31, 2010

     1,868,035      $ 22.62   

Granted

     982,363        35.32   

Vested

     (698,110     21.55   

Forfeited

     (33,685     20.69   
  

 

 

   

 

 

 

Non-vested balance as of December 31, 2011

     2,118,603      $ 28.55   
  

 

 

   

 

 

 

The total fair value of restricted stock and restricted stock units vested during the years ended December 31, 2011, 2010 and 2009, was $22,280, $13,012 and $17,213, respectively.

As of December 31, 2011, there was $53,072 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the plans; that cost is expected to be recognized over a weighted-average period of 1.8 years. The actual tax benefit realized for the tax deductions from stock option exercises totaled $955, $883 and $395 for the years ended December 31, 2011, 2010 and 2009, respectively.

The Company maintains an employee stock purchase plan and has issued 34,966 shares, 37,048 shares, and 34,306 shares in 2011, 2010 and 2009, respectively.