Sonic 2010 Annual Report Download - page 47

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.
Cash flows resulting from the tax benefits for tax deductions in excess of the compensation expense recorded for those options
(excess tax benefits) are required to be classified as financing cash flows. These excess tax benefits were $146, $776 and $2,033
for the years ended August 31, 2010, 2009 and 2008, 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 $3,404, $3,794 and $5,796 for each of the years ended August 31, 2010, 2009 and 2008, respectively.
Stock Options
A summary of stock option activity under the company’s stock-based compensation plans for the year ended August 31, 2010
is presented in the following table:
Weighted
Weighted Average
Average Remaining Aggregate
Exercise Contractual Intrinsic
Options Price Life (Yrs.) Value
Outstanding-beginning of year 7,752 $ 15.76
Granted 1,758 8.87
Exercised (550) 9.87
Forfeited or expired (465) 13.69
Exchange program - replacement options 1,108 13.20
Exchange program - options tendered (2,129) 21.86
Outstanding August 31, 2010 7,474 $ 12.12 4.75 $ 5,295
Exercisable August 31, 2010 3,555 $ 14.47 3.40 $ 3,106
The total intrinsic value of options exercised during the years ended August 31, 2010, 2009 and 2008 was $2,482, $2,597 and
$10,992, respectively. At August 31, 2010, total remaining unrecognized compensation cost related to unvested stock-based
arrangements was $12.3 and is expected to be recognized over a weighted average period of 1.7 years.
Restricted Stock Units
The fair value of each RSU granted is equal to the market price of the company’s stock at the date of the grant. A summary
of the company’s RSU activity during the year ended August 31, 2010 is presented in the following table:
Restricted Weighted-Average Total Fair
Share Units Grant Date Fair Value Value ($)
Outstanding-beginning of year 42 $ 10.45 $ 439
Granted 220 8.68 1,910
Issued (14) 8.75 123
Forfeited and canceled (51) 8.82 450
Outstanding August 31, 2010 197 $ 8.96 $ 1,765
Vested August 31, 2010 –$ –$ –
Not Vested at August 31, 2010 197 $ 8.96 $ 1,765
Accumulated Other Comprehensive Income
In August 2006, the company entered into a forward starting swap agreement with a financial institution to hedge part of the
interest rate risk associated with the pending securitized debt transaction. The forward starting swap was designated as a cash flow
hedge, and was subsequently settled in conjunction with the closing of the Class A-2 notes, as planned. The loss resulting from
settlement was recorded net of tax in accumulated other comprehensive income and is being amortized to interest expense over
the expected term of the debt. See Note 10 for additional information.
Notes to Consolidated Financial Statements
August 31, 2010, 2009 and 2008 (In thousands, except per share data)
45