Sysco 2009 Annual Report Download - page 74

Plan, 153,500 shares that may be issued as options, 73,294 shares that may be issued as stock grants or restricted stock units and 10,000 shares
that may be issued as dividend equivalents.
Stock Options
Certain of Sysco’s option awards are 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 or director 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 or director 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 or the
director first became eligible to retire with the options continuing to vest after retirement for all periods presented, recognized compensation cost
would have been $3,494,000, $8,307,000 and $11,698,000 lower for fiscal 2009, 2008 and 2007, respectively.
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. Expected dividend yield is estimated based on the historical pattern of dividends and the 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:
2009 2008 2007
Dividend yield . ............................................................ 3.2% 2.6% 2.2%
Expected volatility . ......................................................... 34.7% 23.0% 21.0%
Risk-free interest rate . . . .................................................... 2.3% 3.8% 4.7%
Expected life ............................................................. 4.5years 4.5 years 5.1 years
The following summary presents information regarding outstanding options as of June 27, 2009 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 28, 2008. ......................... 65,244,300 $ 30.05
Granted ........................................... 8,089,750 24.93
Exercised . ......................................... (3,074,147) 23.91
Forfeited .......................................... (723,601) 29.76
Expired ........................................... (1,104,790) 30.55
Outstanding as of June 27, 2009. ......................... 68,431,512 $ 29.72 3.58 $ 9,236,000
Vested or expected to vest as of June 27, 2009 . .............. 66,866,317 $ 29.72 3.55 $ 9,236,000
Exercisable as of June 27, 2009 . ......................... 48,437,040 $ 29.78 2.95 $ 9,072,000
The total number of employee options granted was 8,089,750, 6,438,968 and 6,504,200 in fiscal years 2009, 2008 and 2007, respectively.
During fiscal 2009, 1,395,000 options were granted to 12 executive officers and 6,694,750 options were granted to approximately 1,700 other key
employees. 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.
The weighted average grant-date fair value of options granted in fiscal 2009, 2008 and 2007 was $5.88, $6.50 and $6.85, respectively. The
total intrinsic value of options exercised during fiscal 2009, 2008 and 2007 was $24,418,000, $33,601,000 and $73,124,000, respectively.
Restricted Stock
In fiscal 2009, 75,822 shares of restricted stock were granted to an executive officer from the 2007 Stock Incentive Plan.The fair value of these
shares was $23.74 per share, which was based on the stock price on the grant date. These shares will vest one-third each year over a three-year
period. All of these shares remain unvested at June 27, 2009.
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