Share-Based Compensation

12 Months Ended

Sep. 30, 2020

Share-based Payment Arrangement [Abstract]

Stock Options

The Company's employee stock option plans provide for the granting of incentive and nonqualified stock options to acquire shares of common stock to employees at a price not less than the fair market value of the common stock on the date the option is granted. Option terms and vesting periods are determined at the date of grant by the Compensation Committee of the board of directors. Employee options generally vest ratably, in equal amounts, over a four-year service period and expire in seven years. The Company's non-employee director stock option plans provide for the granting of nonqualified stock options to acquire shares of common stock to non-employee directors at the fair market value of the common stock on the date of the grant. Non-employee director options vest ratably, in equal amounts, over a three-year service period and expire in ten years. Non-employee director options have not been granted since February 2011.

As of September 30, 2020, employee and non-employee director stock options and restricted stock units for an additional 9.2 million shares may be granted under the AmerisourceBergen Corporation Omnibus Incentive Plan (the "Plan").

The estimated fair value of options granted is expensed on a straight-line basis over the requisite service periods of the awards and are net of estimated forfeitures. The Company estimates the fair values of option grants using a binomial option pricing model. Expected volatilities are based upon the historical volatility of the Company's common stock and other factors, such as implied market volatility. The Company uses historical exercise data, taking into consideration the optionees' ages at grant date, to estimate the terms for which the options are expected to be outstanding. The Company anticipates that it not will grant any stock options in fiscal 2021. The risk-free rates during the terms of such options are based upon the U.S. Treasury yield curve in effect at the time of grant.

The weighted average fair values of the options granted during the fiscal years ended September 30, 2020, 2019, and 2018 were $16.61, $18.60, and $14.16, respectively. The following weighted average assumptions were used to estimate the fair values of options granted:


	Fiscal Year Ended September 30,
	2020	2019	2018
Risk-free interest rate	1.66%	2.91%	1.89%
Expected dividend yield	1.86%	1.79%	1.96%
Volatility of common stock	28.17%	27.67%	26.54%
Expected life of the options	3.79 years	3.77 years	3.76 years

During the fiscal years ended September 30, 2020, 2019, and 2018, the Company recognized stock option expense of $13.0 million, $21.0 million, and $22.6 million, respectively.

A summary of the Company's stock option activity and related information for its option plans for the fiscal year ended September 30, 2020 is presented below:


(in thousands, except exercise price and contractual term)	Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of September 30, 2019	7,659	$83	4 years	$	35,319
Granted	383	$86
Exercised	(2,242)	$76
Forfeited	(166)	$83
Expired	(75)	$95
Outstanding as of September 30, 2020	5,559	$86	3 years	$	62,770
Exercisable as of September 30, 2020	3,430	$88	2 years	$	33,107
Expected to vest after September 30, 2020	2,072	$83	5 years	$	29,032

The intrinsic value of stock option exercises during the fiscal years ended September 30, 2020, 2019, and 2018 was $42.6 million, $51.2 million, and $116.7 million, respectively.

A summary of the status of the Company's nonvested options as of September 30, 2020 and changes during the fiscal year ended September 30, 2020 is presented below:


(in thousands, except grant date fair value)	Options	Weighted Average Grant Date Fair Value
Nonvested as of September 30, 2019	3,265	$16
Granted	383	$17
Vested	(1,353)	$16
Forfeited	(166)	$16
Nonvested as of September 30, 2020	2,129	$16

During the fiscal years ended September 30, 2020, 2019, and 2018, the total fair values of options vested were $21.3 million, $22.7 million, and $25.8 million, respectively. Expected future compensation expense relating to the 2.1 million nonvested options outstanding as of September 30, 2020 is $10.3 million, which will be recognized over a weighted average period of 1.7 years.

Restricted Stock Units

Restricted stock units vest in full after three years. The estimated fair value of restricted stock units under the Company's restricted stock unit plans is determined by the product of the number of shares granted and the grant date market price of the Company's common stock. The estimated fair value of restricted stock units is expensed on a straight-line basis over the requisite service period, net of estimated forfeitures. During the fiscal years ended September 30, 2020, 2019, and 2018, the Company recognized restricted stock unit expense of $39.8 million, $29.2 million, and $26.8 million, respectively.

A summary of the status of the Company's nonvested restricted stock units as of September 30, 2020 and changes during the fiscal year ended September 30, 2020 are presented below:


(in thousands, except grant date fair value)	Restricted Stock Units	Weighted Average Grant Date Fair Value
Nonvested as of September 30, 2019	1,222	$81
Granted	760	$86
Vested	(346)	$76
Forfeited	(124)	$84
Nonvested as of September 30, 2020	1,512	$85

During the fiscal years ended September 30, 2020, 2019, and 2018, the total fair values of restricted stock units vested were $26.4 million, $14.5 million, and $15.8 million, respectively. Expected future compensation expense relating to the 1.5 million restricted stock units outstanding as of September 30, 2020 is $43.4 million, which will be recognized over a weighted average period of 1.4 years.

Performance Stock Units

Performance stock units are granted to certain executive employees under the Plan and represent common stock potentially issuable in the future. Performance stock units vest at the end of a three-year performance period based upon achievement of specific performance goals. Based upon the extent to which the targets are achieved, vested shares for awards granted prior to fiscal 2018 may range from 0% to 150% of the target award amount. For awards granted beginning in fiscal 2018, vested shares may range from 0% to 200% of the target award amount. The fair value of performance stock units is determined by the grant date market price of the Company's common stock. Compensation expense associated with nonvested performance stock units is recognized over the requisite service period and is dependent on the Company's periodic assessment of the probability of the targets being achieved and its estimate of the number of shares that will ultimately be issued. During the fiscal years ended September 30, 2020, 2019, and 2018, the Company recognized performance stock expense of $21.5 million, $8.5 million, and $12.8 million, respectively.

A summary of the status of the Company's nonvested performance stock units as of September 30, 2020 and changes during the fiscal year ended September 30, 2020 is presented below (based upon target award amounts).


(in thousands, except grant date fair value)	Performance Stock Units	Weighted Average Grant Date Fair Value
Nonvested as of September 30, 2019	283	$84
Granted	150	$86
Vested	(139)	$78
Forfeited	(6)	$89
Nonvested as of September 30, 2020	288	$88

Shares that vested over the three-year performance period ended September 30, 2020 were distributed to employees in November 2020.