Sysco 2007 Annual Report Download - page 84

seven years. As of June 30, 2007, there were 389,872 remaining shares authorized and available for grant under the 2005
Non-Employee Directors Stock Plan.
Certain of SYSCO’s option awards are generally subject to graded vesting over a service period. In those cases, SYSCO
recognizes compensation cost on a straight-line basis over the requisite service period for the entire award. In other
cases, certain of SYSCO’s option awards provide for graded vesting over a service period but include a performance-based
provision allowing for accelerated vesting. In these cases, if it is probable that the performance condition will be met,
SYSCO recognizes compensation cost on a straight-line basis over the shorter performance period; otherwise, it will
recognize compensation cost over the longer service period.
In addition, certain of SYSCO’s options provide that the options continue to vest as if the optionee continued to be an
employee if the optionee meets certain age and years of service thresholds upon retirement. In these cases, for awards
granted through July 2, 2005, SYSCO will recognize the compensation cost for such awards over the service period and
accelerate any remaining unrecognized compensation cost when the employee retires. Due to the adoption of SFAS 123(R),
for awards granted subsequent to July 2, 2005, SYSCO will recognize compensation cost for such awards over the period
from the grant date to the date the employee first becomes eligible to retire with the options continuing to vest after
retirement. If SYSCO had recognized compensation cost for such awards over the period from the grant date to the date
the employee first became eligible to retire with the options continuing to vest after retirement for all periods presented,
recognized compensation cost would have been $11,698,000 and $23,907,000 lower for fiscal 2007 and 2006, respectively.
There would be no impact to recognized compensation cost for fiscal 2005, as the company was accounting for stock
compensation under APB 25, under which no compensation expense was recognized for stock option grants.
The fair value of each option award is estimated as of the date of grant using a Black-Scholes option pricing model. The
weighted average assumptions for the periods indicated are noted in the following table. Expected volatility is based on
historical volatility of SYSCO’s stock, implied volatilities from traded options on SYSCO’s stock and other factors. SYSCO
utilizes historical data to estimate option exercise and employee termination behavior within the valuation model; separate
groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.
The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. The following weighted-average assumptions were used for each fiscal year presented:
2007 2006 2005
Dividend yield_____________________________________________________________________ 2.20% 1.40% 1.45%
Expected volatility _________________________________________________________________ 21% 23% 22%
Risk-free interest rate _____________________________________________________________ 4.7% 3.9% 3.4%
Expected life _____________________________________________________________________ 5 years 5 years 5 years
The following summary presents information regarding outstanding options as of June 30, 2007 and changes during the
fiscal year then ended with regard to options under all stock option plans:
Shares
Under
Option
Weighted
Average
Exercise
Price Per Share
Weighted Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic
Value
Outstanding as of July 1, 2006 _____________________ 65,516,669 $28.60
Granted ________________________________________ 6,539,200 31.70
Exercised ______________________________________ (7,595,620) 24.45
Forfeited _______________________________________ (774,282) 31.82
Expired ________________________________________ (249,308) 28.87
Outstanding as of June 30, 2007 ____________________ 63,436,659 $29.38 4.83 $229,847,000
Vested or expected to vest as of June 30, 2007 _______ 61,688,263 $29.30 4.82 $228,224,000
Exercisable as of June 30, 2007 ____________________ 45,154,040 $28.35 4.62 $209,525,000
The total number of employee options granted was 6,504,200, 4,826,500 and 8,515,000 in fiscal years 2007, 2006 and 2005,
respectively. During fiscal 2007, 594,000 options were granted to 9 executive officers and 5,910,200 options were granted
to approximately 1,600 other key employees. During fiscal 2006, 876,000 options were granted to 17 executive officers and
3,950,500 options were granted to approximately 1,200 other key employees. During fiscal 2005, 2,763,000 options were
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