Sysco 2014 Annual Report Download - page 91

SYSCO CORPORATION-Form10-K 79
PARTII
ITEM8Financial Statements and Supplementary Data
NOTE18 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, a non-employee director plan and the Employees’ Stock Purchase Plan.
Stock Incentive Plans
In November 2013, Sysco’s Long-term Incentive Plan (2013 Plan) was adopted and reserved up to 55,600,000 shares of Sysco common stock for
share-based awards to employees, non-employee directors and key advisors. Of the 55,600,000 authorized shares, 45,000,000 were new shares approved
with the 2013 Plan and 10,600,000 were from remaining shares authorized and available for grant under the amended 2007 Stock Incentive Plan as of the
date of the approval of the 2013 Plan. No further grants will be made from the 2007 Plan. Of the 55,600,000 authorized shares, the full 55,600,000 shares
may be issued as options or stock appreciation rights and up to 17,500,000 shares may be issued as restricted stock, restricted stock units or other types
of stock-based awards. To date, Sysco has issued options 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 ten years. As of June 28, 2014, there were
49,207,002 remaining shares authorized and available for grant in total under the 2013 Plan, of which the full 49,207,002 shares may be issued as options
or stock appreciation rights, or as a combination of up to 16,272,900 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 28, 2014. No new options will be issued under any of the prior plans, as future grants to employees will be made through the 2013 Plan or
subsequently adopted plans. Awards under these plans are subject to time-based vesting with vesting periods that vary by individual grant. The contractual
life of all options granted under these plans is 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. Vesting requirements for awards under these plans vary by individual grant and include either time-based vesting or
vesting based on performance criteria. As of June 28, 2014, there were a total of 415,412 remaining shares authorized and available for grant 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:
2014 2013 2012
Dividend yield 3.5% 3.7% 3.7%
Expected volatility 20.4 20.7 23.4
Risk-free interest rate 2.1 0.7 1.0
Expected life 7.2 years 5.4 years 5.4 years