Sysco 2010 Annual Report Download - page 54
Download and view the complete annual report
Please find page 54 of the 2010 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.The fair value of restricted stock granted to employees is based on the stock price on grant date.The application of a discount to the fair value of
a restricted stock grant is dependent upon whether or not each individual grant contains a post-vesting restriction. The fair value of the stock issued
under the Management Incentive Plans with respect to years prior to fiscal 2009 was based on the stock price on the last day of the fiscal year less a
12% discount for post-vesting restrictions. The discount for post-vesting restrictions was estimated based on restricted stock studies and by
calculating the cost of a hypothetical protective put option over the restriction period. The stock award component of the Management Incentive
Plan bonus awards was removed beginning in fiscal 2009.
The compensation cost related to these share-based awards is recognized over the requisite service period. The requisite service period is
generally the period during which an employee is required to provide service in exchange for the award.
The compensation cost related to stock issuances resulting from awards under the Management Incentive Plan through fiscal 2008 was
accrued over the fiscal year to which the incentive bonus related. The compensation cost related to stock issuances resulting from employee
purchases of stock under the Employees’ Stock Purchase Plan is recognized during the quarter in which the employee payroll withholdings are made.
Certain of our option awards are generally subject to graded vesting over a service period. In those cases, we will recognize compensation cost
on a straight-line basis over the requisite service period for the entire award. In other cases, certain of our option awards provide for graded vesting
over a service period but include a performance-based provision allowing for the vesting to accelerate. In these cases, if it is probable that the
performance condition will be met, we recognize compensation cost on a straight-line basis over the shorter performance period; otherwise, we
recognize compensation cost over the probable longer service period.
In addition, certain of our share-based awards provide that if the award holder retires at certain age and years of service thresholds, the options
continue to vest as if the award holder continued to be an employee or director. In these cases, for awards granted prior to July 2, 2005 (our adoption
date for the fair value recognition provisions in current stock compensation accounting standards), we will recognize the compensation cost for such
awards over the remaining service period and accelerate any remaining unrecognized compensation cost when the employee retires. For awards
granted subsequent to July 3, 2005, we will recognize compensation cost for such awards over the period from the date of grant to the date the
employee first becomes eligible to retire with his options continuing to vest after retirement.
Our option grants include options that qualify as incentive stock options for income tax purposes. In the period the compensation cost related to
incentive stock options is recorded, a corresponding tax benefit is not recorded as it is assumed that we will not receive a tax deduction related to
such incentive stock options. We may be eligible for tax deductions in subsequent periods to the extent that there is a disqualifying disposition of the
incentive stock option. In such cases, we would record a tax benefit related to the tax deduction in an amount not to exceed the corresponding
cumulative compensation cost recorded in the financial statements on the particular options multiplied by the statutory tax rate.
Forward-Looking Statements
Certain statements made herein that look forward in time or express management’s expectations or beliefs with respect to the occurrence of
future events are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They include statements about Sysco’s
ability to increase its sales and market share and grow earnings, the continuing impact of economic conditions on consumer confidence and our
business, sales and expense trends, anticipated multi-employer pension related liabilities and contributions to various multi-employer pension plans,
expectations regarding potential payments of unrecognized tax benefits and interest, expectations regarding share repurchases, expected trends in
fuel pricing, usage costs and surcharges, our expectation regarding the provision for losses on accounts receivable, our intention to lower our cost of
goods sold by leveraging our purchasing power and procurement expertise and capitalizing on an end-to-end view of our supply chain, expected
implementation, costs and benefits of the ERP system, our plan to continue to explore and identify opportunities to grow in international markets and
complimentary lines of business, the impact of ongoing legal proceedings, the loss of SYGMA’s largest customer not having a material adverse effect
on Sysco as a whole, compliance with laws and government regulations not having a material effect on our capital expenditures, earnings or
competitive position, anticipated acquisitions and capital expenditures and the sources of financing for them, continued competitive advantages and
positive results from strategic initiatives, anticipated company-sponsored pension plan liabilities, our expectations regarding cash flow from
operations, the availability and adequacy of insurance to cover liabilities, the impact of future adoption of accounting pronouncements, predictions
regarding the impact of changes in estimates used in impairment analyses, the anticipated impact of changes in foreign currency exchange rates and
Sysco’s ability to meet future cash requirements and remain profitable.
These statements are based on management’s current expectations and estimates; actual results may differ materially due in part to the risk
factors discussed at Item 1.A. above and elsewhere. In addition, the success of Sysco’s strategic initiatives could be affected by conditions in the
economy and the industry and internal factors such as the ability to control expenses, including fuel costs. Expected trends related to fuel costs and
usage are impacted by fluctuations in the economy generally and numerous factors affecting the oil industry that are beyond our control. Our efforts
to lower our cost of goods sold may be impacted by factors beyond our control, including actions by our competitors and/or customers. As
implementation of the ERP system and the Business Transformation Project begins, there may be changes in design or timing that impact near-term
expense and cause us to revise the project calendar and budget, and additional hiring and training of employees and consultants may be required,
which could also impact project expense and timing. Company-sponsored pension plan liabilities are impacted by a number of factors including the
discount rate for determining the current value of plan benefits, the assumption for the rate of increase in future compensation levels and the
expected rate of return on plan assets.The amount of shares repurchased in a given period is subject to a number of factors, including available cash
and our general working capital needs at the time. Our plans with respect to growth in international markets and complimentary lines of business are
subject to the company’s other strategic initiatives and plans and economic conditions generally. Legal proceedings are impacted by events,
30