Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Stock-Based Compensation

Stock-Based Compensation

Note 8—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, 2012, there were 4,943,210 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 generally vest ratably over a period of five years and are generally 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, 2012, the maximum number of shares of common stock available for the granting of additional stock options under the Directors Option Plan was 70,000, although no additional options are expected to be granted under this plan.  Options granted under the Directors Option Plan generally vest ratably over a period of three years and are generally exercisable over a period of ten years from the date of grant.

In May 2012, the Company adopted the 2012 Restricted Stock Plan for Directors of Amphenol Corporation (the “Restricted Stock Plan”). The Restricted Stock Plan is administered by the Company’s Board of Directors.  As of September 30, 2012, the maximum number of restricted shares available for grants under the Restricted Stock Plan was 108,571.  Restricted shares granted under the Restricted Stock Plan generally vest on the first anniversary of the grant date.  Grants under the Restricted Stock Plan entitle the holder to receive shares of the Company’s common stock without payment.

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 grant-date fair value of each restricted share grant is determined based on the closing share price of the Company’s stock on the date of the grant. 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 for option grants requires management to make certain assumptions with respect to selected model inputs. Expected share price volatility is 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 exercise and historical post-vesting 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, 2012, the Company’s income before income taxes and net income were reduced for stock-based compensation expense by $8,066 and $5,885, respectively, and these reductions were $23,167 and $16,542, respectively, for the nine months ended September 30, 2012.  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. The expense incurred for stock-based compensation is included in selling, general and administrative expense in the accompanying Condensed Consolidated Statements of Income.

Stock Options

Stock option activity for the three and nine months ended September 30, 2012 was as follows:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2011	14,016,900		$	38.00	6.89	$	125,067
Options exercised	(853,460	)	26.23
Options forfeited	(123,000	)	38.53
Options outstanding at March 31, 2012	13,040,440		38.77		6.79	273,830
Options granted	2,954,000		53.26
Options exercised	(511,270	)	25.99
Options forfeited	(58,540	)	43.47
Options outstanding at June 30, 2012	15,424,630		41.95		7.26	200,023
Options granted	11,000		59.19
Options exercised	(1,232,760	)	30.65
Options forfeited	(72,920	)	46.27
Options outstanding at September 30, 2012	14,129,950		$	42.93	7.22	$	225,358
Vested and non-vested options expected to vest at September 30, 2012	12,971,873		$	41.44	7.11	$	212,372
Exercisable options at September 30, 2012	6,147,810		$	36.64	5.71	$	136,703

A summary of the status of the Company’s non-vested options as of September 30, 2012 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, 2011	7,636,576		$	13.41
Options vested	(7,000	)	16.98
Options forfeited	(123,000	)	12.52
Non-vested options at March 31, 2012	7,506,576		13.43
Options granted	2,954,000		12.94
Options vested	(2,354,173	)	13.07
Options forfeited	(58,540	)	13.51
Non-vested options at June 30, 2012	8,047,863		13.35
Options granted	11,000		14.53
Options vested	(3,803	)	10.65
Options forfeited	(72,920	)	13.63
Non-vested options at September 30, 2012	7,982,140		$	13.36

During the three and nine months ended September 30, 2012 and 2011, the following activity occurred under the Company’s option plans:

	Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011
Total intrinsic value of stock options exercised	$	36,383	$	1,519	$	77,320	$	27,921
Total fair value of stock options vested	41		46		30,922		28,492

As of September 30, 2012, the total compensation cost related to non-vested options not yet recognized is approximately $83,689 with a weighted average expected amortization period of 3.41 years.

Restricted Shares

As of September 30, 2012, the Company has issued 16,429 restricted shares with a weighted-average fair value at grant date of $53.26 per share.  As of September 30, 2012, the total compensation cost related to non-vested restricted shares not yet recognized was approximately $567 with a weighted average expected amortization period of 0.65 years.