Incentive Compensation Plans

9 Months Ended

Sep. 30, 2011

Incentive Compensation Plans [Abstract]

Incentive Compensation Plans

NOTE 6.     Incentive Compensation Plans

Share-based compensation expense was recognized in the condensed consolidated statements of earnings as follows (dollars in thousands):

	Three months ended						Nine months ended
	September 30,						September 30,
	2011			2010			2011			2010
Rental expenses	$	1,562		$	1,486		$	3,866		$	3,803
Cost of sales		224			292			740			736
Selling, general and administrative expenses		6,073			6,961			19,132			19,634
Pre-tax share-based compensation expense		7,859			8,739			23,738			24,173
Less:  Income tax benefit		(2,750	)		(2,919	)		(8,037	)		(8,288	)
Total share-based compensation expense, net of tax	$	5,109		$	5,820		$	15,701		$	15,885

A summary of our stock option activity, and related information, for the nine months ended September 30, 2011 is set forth in the table below:

					Weighted
					Average
			Weighted		Remaining	Aggregate
			Average		Contractual	Intrinsic
	Options		Exercise		Term	Value
	(in thousands)		Price		(years)	(in thousands)
Options outstanding – January 1, 2011	5,470		$	39.20
Granted	757		$	46.98
Exercised	(1,059	)	$	40.93
Forfeited/Expired	(288	)	$	40.36
Options outstanding – September 30, 2011	4,880		$	39.96	6.84	$	126,526
Exercisable as of September 30, 2011	2,371		$	41.47	5.80	$	57,916

The following table summarizes restricted stock activity for the nine months ended September 30, 2011:

	Number of		Weighted
	Shares		Average Grant
	(in thousands)		Date Fair Value
Unvested shares – January 1, 2011	1,101		$	37.41
Granted	713		$	48.73
Vested and distributed	(271	)	$	45.47
Forfeited	(137	)	$	42.70
Unvested shares – September 30, 2011	1,406		$	41.06

KCI has a policy of issuing new shares to satisfy stock option exercises and restricted stock award issuances.  In addition, KCI may purchase shares in connection with the net share settlement exercise of employee stock options for minimum tax withholdings and exercise price and the withholding of shares to satisfy the minimum tax withholdings on the vesting of restricted stock.