Sysco 2013 Annual Report Download - page 84

SYSCO CORPORATION-Form10-K 73
PARTII
ITEM8Financial Statements and Supplementary Data
NOTE17 Share-Based Compensation
Sysco provides compensation bene ts to employees and non-employee directors under several share-based payment arrangements including various
employee stock option plans, the Employees’ Stock Purchase Plan, the Management Incentive Plan and various non-employee director plans.
Stock Incentive Plans
In November2009, Sysco’s 2007 Stock Incentive Plan was amended and provides for the issuance of up to 55,000,000shares of Sysco common stock
for share-based awards to of cers and other employees of the company. Of the 55,000,000 authorizedshares, the full 55,000,000shares may be issued
as options or stock appreciation rights and up to 10,000,000shares may be issued as restricted stock, restricted stock units or other types of stock-based
awards. To date, Sysco has issued options, restricted stock and restricted stock units under this plan. Vesting requirements for awards under this plan will
vary by individual grant and may include either time-based vesting or time-based vesting subject to acceleration based on performance criteria for  scal
periods of at least one year. The contractual life of all options granted under this plan will be no greater than seven years. As of June29,2013, there were
10,159,110 remainingshares authorized and available for grant in total under the amended 2007 Stock Incentive Plan, of which the full 10,159,110shares
may be issued as options or stock appreciation rights, or as a combination of up to 5,530,402shares that may be issued as restricted stock, restricted
stock units or other types of stock-based awards with the remainder available for issuance as options or stock appreciation rights.
Sysco has also granted employee options under several previous employee stock option plans for which previously granted options remain outstanding
as of June29,2013. No new options will be issued under any of the prior plans, as future grants to employees will be made through the amended 2007
Stock Incentive Plan or subsequently adopted plans. Vesting requirements for awards under these plans vary by individual grant and include either time-
based vesting or time-based vesting subject to acceleration based on performance criteria. The contractual life of all options granted under these plans
through July3,2004 is 10 years; options granted after July3,2004 have a contractual life of seven years.
In November2009, Sysco’s 2009 Non-Employee Directors Stock Plan was adopted and provides for the issuance of up to 750,000shares of Sysco
common stock for share-based awards to non-employee directors. The authorizedshares may be granted as restricted stock, restricted stock units,
electedshares or additionalshares. In addition, options and unvested commonshares also remained outstanding as of June29,2013 under previous
non-employee director stock plans. No further grants will be made under these previous plans, as all future grants to non-employee directors will be
made through the 2009 Non-Employee Directors Stock Plan or subsequently adopted plans. Vesting requirements for awards under these plans vary
by individual grant and include either time-based vesting or vesting based on performance criteria. The contractual life of all options granted under these
plans through July3,2004 is 10 years; options granted after July3,2004 have a contractual life of seven years. As of June29,2013, there were 483,096
remainingshares authorized and available for grant in total under the 2009 Non-Employee Directors Stock Plan.
Stock Options
Sysco’s option awards are subject to graded vesting over a service period. Sysco recognizes compensation cost on a straight-line basis over the requisite
service period for the entire award.
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, Sysco will recognize compensation cost for such awards over the period
from the grant date to the date the employee or director  rst becomes eligible to retire with the options continuing to vest after retirement.
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  scal year presented:
2013 2012 2011
Dividend yield 3.7% 3.7% 3.5%
Expected volatility 20.7 23.4 23.4
Risk-free interest rate 0.7 1.0 1.2
Expected life 5.4 years 5.4 years 5.0 years