Sonic 2009 Annual Report Download - page 45

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Notes to Consolidated Financial Statements
August 31, 2009, 2008 and 2007 (In thousands, except per share data)
The company estimates expected volatility based on historical daily price changes of the company’s common stock for a period equal
to the current expected term of the options. The risk-free interest rate is based on the United States treasury yields in effect at the time
of grant corresponding with the expected term of the options. The expected option term is the number of years the company estimates
that options will be outstanding prior to exercise considering vesting schedules and our historical exercise patterns.
SFAS 123R requires the cash flows resulting from the tax benefits for tax deductions in excess of the compensation expense recorded
for those options (excess tax benefits) to be classified as financing cash flows. These excess tax benefits were $776, $2,033 and $4,117
for the years ended August 31, 2009, 2008 and 2007, respectively, and are classified as a financing cash inflow in the company’s
Consolidated Statements of Cash Flows. The proceeds from exercises of stock options are also classified as cash flows from financing
activities and totaled $3,794, $5,796 and $7,732 for each of the years ended August 31, 2009, 2008 and 2007, respectively.
Stock Options
A summary of stock option activity under the company’s share-based compensation plans for the year ended August 31, 2009 is
presented in the following table:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Life (Yrs.) Value
Outstanding-beginning of year 7,762 $ 16.51
Granted 1,830 10.22
Exercised (719) 6.25
Forfeited or expired (1,121) 18.02
Outstanding August 31, 2009 7,752 $ 15.76 4.62 $ 6,430
Exercisable August 31, 2009 4,816 $ 16.14 3.85 $ 4,426
The total intrinsic value of options exercised during the years ended August 31, 2009, 2008 and 2007 was $2,597, $10,992 and
$19,408, respectively. At August 31, 2009, total remaining unrecognized compensation cost related to unvested stock-based arrangements
was $12.2 and is expected to be recognized over a weighted average period of 1.1 years.
Performance Share Units
The fair value of each PSU granted is equal to the market price of the company’s stock at date of grant. As of August 31, 2009, the
company’s performance was not expected to meet the minimum threshold for the 2009 grant to vest, therefore, the PSUs have not been
expensed and the company has not realized any tax deductions.
A summary of the company’s PSU activity during the year ended August 31, 2009, is presented in the following table:
Performance Weighted-Average Total Fair
Share Units Grant Date Fair Value Value ($)
Outstanding-beginning of year –$ –
Granted 426 10.15 $ 4,324
Issued ––
Forfeited 13 10.15
Outstanding August 31, 2009 413 $ 10.15 $ 4,192
Exercisable August 31, 2009 –$ –$ –
Not Vested at August 31, 2009 413 $ 10.15 $ 4,192
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