Harris Teeter 2007 Annual Report Download - page 47

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43
RUDDICK CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
STOCK OPTIONS AND STOCK AWARDS
At September 30, 2007, the Company has 1993, 1995, 1997, 2000 and 2002 equity incentive plans, which
were approved by the Company’s shareholders and authorized the issuance of 5,500,000 shares of common
stock pursuant thereto. Under certain stock option plans, the Company has granted incentive stock options
to employees or nonqualified stock options to employees and outside directors. The Company’s incentive
stock options generally become exercisable in installments of 20% per year at each of the first through fifth
anniversaries from grant date and expire seven years from grant date and nonqualified stock options expire ten
years from grant date. Historically and pursuant to the terms of certain plans, the Company grants a single, one-
time nonqualified stock option of 10,000 shares, generally vested immediately, to each of its outside directors
at the time of their initial election to the Board. Under each of the stock option plans, the exercise price of each
stock option shall be no less than the market price of the Company’s stock on the date of grant, and an option’s
maximum term is ten years. At the discretion of the Company, under certain plans a stock appreciation right may
be granted and exercised in lieu of the exercise of the related option (which is then forfeited). Certain of the plans
also allow the Company to grant stock awards such as restricted stock. Under the plans, as of September 30, 2007
the Company may grant additional options or stock awards for the purchase of 1,513,000 shares.
Beginning in November 2004, the Board of Directors began approving stock awards in lieu of stock
options. Historically these awards were apportioned 50% as a fixed award of restricted stock (restricted from
sale or transfer until vesting over a five-year period of continued employment) and 50% as performance share
awards, based on the attainment of certain performance targets for the ensuing fiscal year. If the fiscal year
performance targets are met, the performance shares are subsequently issued as restricted stock and vest over
four years of continued employment.
A summary of the status of the Company’s restricted stock awards as of September 30, 2007, October 1,
2006 and October 2, 2005, changes during the periods ending on those dates and weighted average grant-date
fair value (WAGFV) is presented below (shares in thousands):
Stock Awards September 30, 2007 October 1, 2006 October 2, 2005
Shares WAGFV Shares WAGFV Shares WAGFV
Non-vested at beginning of period . . . . . . . . . . . . 325 $ 20.92 116 $ 22.47 — —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 28.63 233 20.21 150 $ 22.47
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (50 ) 21.55 (15 ) 22.06 — —
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (67 ) 21.09 (9 ) 21.64 (34 ) 22.47
Non-vested at end of period . . . . . . . . . . . . . . . . . 477 25.17 325 20.92 116 22.47
The stock awards are being expensed ratably over the employees’ five-year requisite service period in
accordance with the graded vesting schedule, resulting in more expense being recognized in the early years.
Compensation expense related to restricted awards amounted to $3,529,000, $1,901,000 and $924,000 for fiscal
years 2007, 2006 and 2005, respectively. The remaining unamortized expense as of September 30, 2007 is
$6,002,000, with a weighted average recognition period of 1.96 years.
In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS 123R”) as a
replacement to SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”). SFAS 123R
supersedes APB No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) and related interpretations,
which allowed companies to use the intrinsic method of valuing share-based payment transactions. SFAS 123R
requires all share-based payments to employees, including grants of employee stock options, to be recognized in
the financial statements based on the fair-value method as defined in SFAS 123.