Molina Medicaid Solutions - DHHR

e10vkMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)purchases under these programs. The timing and amount of purchases were primarily made pursuant to a Rule 10b5-1 trading plans. Under these programs, we purchasedapproximately 1.9 million shares for an aggregate purchase price of $49.9 million (average cost of approximately $25.70 per share). These shares were subsequently retired in2008.In December 2008, we filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission covering the issuance of up to $300 million ofsecurities, including common stock or debt securities, and up to 250,000 shares of our common stock, offered by selling stockholders. We may publicly offer securities fromtime to time at prices and terms to be determined at the time of the offering.15. Employee BenefitsWe sponsor a defined contribution 401(k) plan that covers substantially all full-time salaried and hourly employees of our company and its subsidiaries. Eligibleemployees are permitted to contribute up to the maximum amount allowed by law. We match up to the first 4% of compensation contributed by employees. Expense recognizedin connection with our contributions to the 401(k) plan totaled $4.7 million, $3.9 million and $3.6 million in the years ended December 31, 2009, 2008, and 2007, respectively.We also have a nonqualified deferred compensation plan for certain key employees. Under this plan, eligible participants may defer up to 100% of their base salary and100% of their bonus to provide tax-deferred growth for retirement. The funds deferred are invested in corporate-owned life insurance, under a rabbi trust.16. Stock PlansIn 2002, we adopted the 2002 Equity Incentive Plan (the “2002 Plan”), which provides for the award of stock options, restricted stock, performance shares, and stockbonuses to the company’s officers, employees, directors, consultants, advisors, and other service providers. The 2002 Plan initially allowed for the issuance of 1.6 million sharesof common stock. Beginning January 1, 2004, shares eligible for issuance automatically increase by the lesser of 400,000 shares or 2% of total outstanding capital stock on afully diluted basis, unless the board of directors affirmatively acts to nullify the automatic increase. There were 4.0 million shares reserved for issuance under the 2002 Plan asof January 1, 2009.Restricted stock awards are granted with a fair value equal to the market price of our common stock on the date of grant, and generally vest in equal annual installmentsover periods up to four years from the date of grant. Stock option awards have an exercise price equal to the fair market value of our common stock on the date of grant,generally vest in equal annual installments over periods up to four years from the date of grant, and have a maximum term of ten years from the date of grant.Under our 2002 Employee Stock Purchase Plan (the “ESPP”), eligible employees may purchase common shares at 85% of the lower of the fair market value of ourcommon stock on either the first or last trading day of each six-month offering period. Each participant is limited to a maximum purchase of $25,000 (as measured by the fairvalue of the stock acquired) per year through payroll deductions. Under the ESPP, we issued 120,300 and 86,400 shares of our common stock during the years endedDecember 31, 2009 and 2008, respectively. Beginning January 1, 2004, and each year until the 2.2 million maximum aggregate number of shares reserved for issuance wasreached on December 31, 2008, shares available for issuance under the ESPP automatically increased by 1% of total outstanding capital stock. The aggregate number ofunissued common shares available for future grants under the 2002 Plan and the ESPP combined was 3.8 million as of December 31, 2009, and 3.9 million as of December 31,2008.95Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The following table illustrates the components of our stock-based compensation expense that are reported in general and administrative expenses in the consolidatedstatements of income:Year Ended December 31,2009 2008 2007Pretax Net-of-Tax Pretax Net-of-Tax Pretax Net-of-TaxCharges Amount Charges Amount Charges AmountRestricted stock awards $ 5,789 $ 3,589 $ 5,171 $ 3,206 $ 3,751 $ 2,335Stock options (including expense relating to our ESPP) 1,696 1,052 2,640 1,637 3,437 2,139Total $ 7,485 $ 4,641 $ 7,811 $ 4,843 $ 7,188 $ 4,474For both restricted stock and stock option awards, the expense is recognized over the vesting period, generally straight-line over four years. As of December 31, 2009,there was $12.2 million of unrecognized compensation cost related to unvested restricted stock awards, which we expect to recognize over a weighted-average period of2.6 years. This unrecognized compensation cost assumes an estimated forfeiture rate of 6% as of December 31, 2009. Also as of December 31, 2009, there was $0.9 million ofunrecognized compensation expense related to unvested stock options, which we expect to recognize over a weighted-average period of 1.3 years.The total fair value of restricted shares vested during the years ended December 31, 2009, 2008, and 2007 was $3.2 million, $2.5 million, and $2.6 million, respectively.Unvested restricted stock activity for the year ended December 31, 2009 was as follows:Weighted-Average Grant DateShares Fair ValueUnvested balance as of December 31, 2008 470,955 $ 31.95Granted 425,000 $ 18.93Vested (163,700) $ 30.52Forfeited (44,625) $ 25.82Unvested balance as of December 31, 2009 687,630 $ 24.64No stock options were exercised during the year ended December 31, 2009; the total intrinsic value of stock options exercised during the year ended December 31, 2008was nominal. The total intrinsic value of stock options exercised during the year ended December 31, 2007 amounted to $4.3 million. Stock option activity for the year endedDecember 31, 2009 was as follows:Weighted-Weighted- Average AggregateAverage Remaining IntrinsicNumber Exercise Contractual Valueof Options Price Term (Years) (000s)Outstanding at December 31, 2008 665,339 $ 30.29Forfeited (14,600) $ 31.96Outstanding at December 31, 2009 650,739 $ 30.25 5.8 $ 288Exercisable and expected to vest at December 31, 2009(a) 640,478 $ 30.22 5.8 $ 288Exercisable at December 31, 2009 542,905 $ 29.92 5.5 $ 288(a) Stock options exercisable and expected to vest at December 31, 2009 information is based on an estimated forfeiture rate of 13%.96Table of ContentsMOLINA HEALTHCARE, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)The following is a summary of information about stock options outstanding and exercisable at December 31, 2009:Options Outstanding Options ExercisableNumber Weighted- NumberOutstanding Average Weighted- Exercisable WeightedatRemaining Average at AverageDecember 31, Contractual Exercise December 31, ExerciseRange of Exercise Prices 2009 Life (Years) Price 2009 Price$4.50 - $27.49 164,170 4.0 $ 23.11 162,670 $ 23.10$28.66 - $28.66 173,744 6.1 $ 28.66 173,744 $ 28.66http://sec.gov/Archives/edgar/data/1179929/000095012310025132/a55407e10vk.htm[1/6/2012 11:12:35 AM]