Henry Schein 2009 Annual Report Download - page 105

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HENRY SCHEIN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
(In thousands, except share and per share data)
93
Note 14 – Employee Benefit Plans – (Continued)
With respect to time-based restricted stock, we estimate the fair value on the date of grant based on our
closing stock price. With respect to performance-based restricted stock, the number of shares that
ultimately vest and are received by the recipient is based upon our earnings per share performance as
measured against specified targets over a three-year period as determined by the Compensation Committee
of the Board of Directors. Though there is no guarantee that performance targets will be achieved, we
estimate the fair value of performance-based restricted stock, based on our closing stock price at time of
grant.
The Plans provide for adjustments to the performance-based restricted stock targets for significant
events such as acquisitions, divestitures, new business ventures and share repurchases. Over the
performance period, the number of shares of common stock that will ultimately vest and be issued and the
related compensation expense is adjusted upward or downward based upon our estimation of achieving
such performance targets. The ultimate number of shares delivered to recipients and the related
compensation cost recognized as an expense will be based on our actual performance metrics as defined
under the Plans.
Restricted stock units are unit awards that we grant to certain employees that entitle the recipient to
shares of common stock upon vesting. We grant restricted stock units with the same time-based and
performance-based vesting that we use for restricted stock. The fair value of restricted stock units is
determined on the date of grant, based on our closing stock price.
We record deferred income tax assets for awards that result in deductions on our income tax returns
based on the amount of compensation cost recognized and our statutory tax rate in the jurisdiction in which
we will receive a deduction. Differences between the deferred income tax assets recognized for financial
reporting purposes and the actual tax deduction reported on our income tax return are recorded in
additional paid-in capital (if the tax deduction exceeds the deferred income tax asset) or in earnings (if the
deferred income tax asset exceeds the tax deduction and no additional paid-in capital exists from previous
awards).
Stock-based compensation grants for the year ended December 26, 2009 primarily consisted of
restricted stock and restricted stock unit grants. Stock-based compensation grants for the years ended
December 27, 2008 and December 29, 2007 consisted of stock options, restricted stock and restricted stock
unit grants. Certain options granted require us to settle the option in the form of a cash payment. As of
December 26, 2009, we have recorded a liability of $0.4 million relating to fair value measurement of
these options. The weighted-average grant date fair value of stock-based awards granted before forfeitures
was $34.35, $18.44 and $21.61 per share during the years ended December 26, 2009, December 27, 2008
and December 29, 2007. For the year ended December 26, 2009, the fair value of stock-based awards
issued consisted mainly of restricted stock (including restricted stock units).
Total unrecognized compensation cost related to non-vested awards as of December 26, 2009 was
$49.1 million, which is expected to be recognized over a weighted-average period of approximately two
years.