Sysco 2008 Annual Report Download - page 78

average stock price for the year preceding the option grant.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:
2008 2007 2006
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6% 2.2% 1.4%
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23% 21% 23%
Risk-free interest rate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8% 4.7% 3.9%
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 years 5.1 years 5.2 years
The following summary presents information regarding outstanding options as of June 28, 2008 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 June 30, 2007 . . . . . . . . . . . . . . . . . . . . 63,436,658 $ 29.38
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,438,968 33.39
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,702,300) 23.74
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (540,700) 32.25
Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (388,326) 32.24
Outstanding as of June 28, 2008 . . . . . . . . . . . . . . . . . . . . 65,244,300 $ 30.05 4.14 $ 46,439,000
Vested or expected to vest as of June 28, 2008 . . . . . . . . . 63,608,630 $ 29.99 4.13 $ 46,436,000
Exercisable as of June 28, 2008 . . . . . . . . . . . . . . . . . . . . 47,411,023 $ 29.14 3.80 $ 45,499,000
The total number of employee options granted was 6,438,968, 6,504,200 and 4,826,500 in fiscal years 2008, 2007 and 2006,
respectively. During fiscal 2008, 699,000 options were granted to 12 executive officers and 5,739,968 options were granted to
approximately 1,500 other key employees. 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.
The weighted average grant-date fair value of options granted in fiscal 2008, 2007 and 2006 was $6.50, $6.85 and $7.83, respectively.
The total intrinsic value of options exercised during fiscal 2008, 2007 and 2006, was $33,601,000, $73,124,000 and $48,928,000,
respectively.
Employees’ Stock Purchase Plan
SYSCO has an Employees’ Stock Purchase Plan that permits employees to invest in SYSCO common stock by means of periodic payroll
deductions at 85% of the closing price on the last business day of each calendar quarter. In November 2007, the Employees’ Stock Purchase
Plan was amended to reserve an additional 6,000,000 shares of SYSCO common stock for issuance under the plan. Including the additional
6,000,000 shares reserved in fiscal 2008, the total number of shares which may be sold pursuant to the plan may not exceed
74,000,000 shares, of which 7,416,677 remained available as of June 28, 2008.
During fiscal 2008, 1,769,421 shares of SYSCO common stock were purchased by the participants as compared to 1,708,250 shares
purchased in fiscal 2007 and 1,840,764 shares purchased in fiscal 2006. In July 2008, 495,245 shares were purchased by participants.
The weighted average fair value of employee stock purchase rights issued pursuant to the Employees’ Stock Purchase Plan was $4.81,
$5.02 and $4.88 per share during fiscal 2008, 2007 and 2006, respectively.The fair value of the stock purchase rights was calculated as the
difference between the stock price at date of issuance and the employee purchase price.
Management Incentive Compensation
SYSCO’s Management Incentive Plan compensates key management personnel for specific performance achievements. With respect
to bonuses for fiscal 2008 and earlier years, the bonuses earned and expensed under this plan were paid in the following fiscal year in both
cash and stock or deferred for payment in future years at the election of each participant. The stock awards under this plan immediately vest
upon issuance; however, participants are restricted from selling, transferring, giving or otherwise conveying the shares for a period of two
years from the date of issuance of such shares.The fair value of the stock issued under the Management Incentive Plan is based on the stock
price less a 12% discount for post-vesting restrictions. The discount for post-vesting restrictions is estimated based on restricted stock
studies and by calculating the cost of a hypothetical protective put option over the restriction period.
A total of 588,143 shares, 323,822 shares and 617,637 shares at a fair value of $32.99, $30.56 and $36.25, respectively, were issued
pursuant to this plan in fiscal 2008, 2007 and 2006, respectively, for bonuses earned in the preceding fiscal years. As of June 28, 2008,
there were 2,211,857 remaining shares that may be issued under the Management Incentive Plan. In August 2008, 672,087 shares were
issued in payment of the stock portion of the bonuses earned in fiscal 2008. In May 2008, the Management Incentive Plan was amended to
remove the stock component of the bonus structure. Therefore, there will be no stock award component for the fiscal 2009 bonuses under
this plan.
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