Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Stock-Based Compensation

Stock-Based Compensation

Note 10—Stock-Based Compensation

In May 2009, the Company adopted the 2009 Stock Purchase and Option Plan (the “2009 Option Plan”) for Key Employees of the Company and its subsidiaries.  The Company currently also maintains the 2000 Stock Purchase and Option Plan (the “2000 Option Plan”).  No additional options can be granted under the 2000 Option Plan.  The 2009 Option Plan authorizes the granting of additional stock options by a committee of the Company’s Board of Directors. As of September 30, 2011, there were 7,656,050 shares of common stock available for the granting of additional stock options under the 2009 Option Plan. Options granted under the 2000 Option Plan and the 2009 Option Plan vest ratably over a period of five years and are exercisable over a period of ten years from the date of grant.

In 2004, the Company adopted the 2004 Stock Option Plan for Directors of Amphenol Corporation (the “Directors Option Plan”). The Directors Option Plan is administered by the Company’s Board of Directors.  As of September 30, 2011, the maximum number of shares of common stock available for the granting of additional stock options under the Directors Option Plan was 80,000.  Options granted under the Directors Option Plan vest ratably over a period of three years and are exercisable over a period of ten years from the date of grant.

The grant-date fair value of each option grant under the 2000 Option Plan, the 2009 Option Plan and the Directors Option Plan is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility was calculated based on the historical volatility of the stock of the Company and implied volatility derived from related exchange traded options. The average expected life was based on the contractual term of the option and expected employee exercise and historical post-vesting employment termination experience. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The expected annual dividend per share is based on the Company’s dividend rate.

Stock-based compensation expense includes the estimated effects of forfeitures, which are adjusted over the requisite service period to the extent actual forfeitures differ or are expected to differ from such estimates.  Changes in estimated forfeitures are recognized in the period of change and impact the amount of expense to be recognized in future periods.  For the three months ended September 30, 2011, the Company’s income before income taxes and net income were reduced for stock-based compensation expense by $7,630 and $5,545, respectively, and these reductions were $21,011 and $15,156, respectively, for the nine months ended September 30, 2011.  For the three months ended September 30, 2010, the Company’s income before income taxes and net income were reduced for stock-based compensation expense by $6,965 and $5,376, respectively, and these reductions were $18,580 and $14,269, respectively, for the nine months ended September 30, 2010. The expense incurred for stock-based compensation is included in selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Income.

Stock option activity for the three and nine months ended September 30, 2011 was as follows:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2010	12,706,324		$	33.93	7.18	$	239,534
Options granted	35,000		53.41
Options exercised	(576,454	)	20.68
Options forfeited	(38,300	)	37.49
Options outstanding at March 31, 2011	12,126,570		34.54		7.08	$	240,698
Options granted	2,506,350		53.48
Options exercised	(303,328	)	31.42
Options forfeited	(82,300	)	38.10
Options outstanding at June 30, 2011	14,247,292		37.92		7.38	$	228,952
Options exercised	(82,067	)	34.16
Options forfeited	(39,400	)	40.93
Options outstanding at September 30, 2011	14,125,825		$	37.93	7.13	$	86,994
Vested and non-vested options expected to vest at September 30, 2011	13,102,554		$	37.46	7.02	$	84,581
Exercisable options at September 30, 2011	6,450,449		$	31.39	5.64	$	66,899

A summary of the status of the Company’s non-vested options as of September 30, 2011 and changes during the three and nine months then ended is as follows:

	Options		Weighted Average Fair Value at Grant Date
Non-vested options at December 31, 2010	7,623,976		$	12.78
Options granted	35,000		16.98
Options forfeited	(38,300	)	12.63
Non-vested options at March 31, 2011	7,620,676		12.80
Options granted	2,506,350		14.15
Options vested	(2,326,350	)	12.23
Options forfeited	(82,300	)	12.82
Non-vested options at June 30, 2011	7,718,376		13.41
Options vested	(3,600	)	12.65
Options forfeited	(39,400	)	13.18
Non-vested options at September 30, 2011	7,675,376		$	13.41

During the three and nine months ended September 30, 2011 and 2010, the following activity occurred under the Company’s option plans:

	Three months ended September 30,				Nine months ended September 30,
	2011		2010		2011		2010
Total intrinsic value of stock options exercised	$	1,519	$	13,566	$	27,921	$	23,265
Total fair value of stock options vested	46		31		28,492		23,698

On September 30, 2011, the total compensation cost related to non-vested options not yet recognized is approximately $81,331 with a weighted average expected amortization period of 3.45 years.