Sunoco 2008 Annual Report Download - page 98

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The following table summarizes information with respect to common stock option awards under Sunoco’s
management incentive plans (dollars in millions, except per-share and per-option amounts):
Shares
Under Option
Weighted-
Average
Option Price
Per Share
Weighted-
Average
Fair Value
Per Option*
Intrinsic
Value
Outstanding, December 31, 2005 ...... 1,528,306 $45.27
Granted ............................. 456,325 $68.72 $19.68
Exercised ........................... (658,190) $38.05 $20
Canceled ............................ (6,400) $52.61
Outstanding, December 31, 2006 ...... 1,320,041 $56.95
Granted ............................. 502,434 $64.19 $16.92
Exercised ........................... (250,167) $31.26 $11
Canceled ............................ —
Outstanding, December 31, 2007 ...... 1,572,308 $63.35
Granted ............................. 684,400 $35.29 $8.11
Exercised** .......................... (17,815) $15.58 $1
Canceled ............................ (2,120) $16.44
Outstanding, December 31, 2008 ...... 2,236,773*** $55.19 $8
Exercisable, December 31
2006 ............................... 492,016 $30.47
2007 ............................... 613,549 $58.67
2008 ............................... 1,049,939*** $63.85 $3
*Represents the weighted-average fair value per option granted as of the date of grant.
**Cash received by the Company upon exercise totaled less than $1 million and the related tax benefit realized amounted to less
than $1 million.
***The weighted-average remaining contractual term of outstanding options and exercisable options was 8.3 and 6.9 years,
respectively.
Outstanding common stock award units under the Company’s management incentive plans mature upon
completion of a three- or five-year service period or upon attainment of predetermined performance targets
during a three-year period. For performance-based awards, adjustments for attainment of performance targets can
range from 0-200 percent of the award grant. Awards are payable in cash or common stock as determined on the
date of grant. Awards to be paid in cash are classified as liabilities in the Company’s consolidated balance sheets
and are re-measured for expense purposes at fair value each period (based on the fair value of an equivalent
number of Sunoco common shares at the end of the period) with any change in fair value recognized as an
increase or decrease in income. For service-based awards to be settled in common stock, the grant-date fair value
is based on the closing price of the Company’s shares on the date of grant. For performance-based awards, the
payout of which is determined by market conditions related to stock price performance, the grant-date fair value
is generally estimated using a Monte Carlo simulation model. Use of this model requires the Company to make
certain assumptions regarding expected volatility of the Company’s stock price during the vesting period as well
as regarding the risk-free interest rate and correlations of stock returns among the Company and its peers. The
Company uses historical share prices, for a period equivalent to the award’s term, to estimate the expected
volatility of the Company’s share price. The risk-free interest rate is based on the U.S. Treasury yield curve at the
date of grant for a term that approximates the award’s term. Correlations of stock returns among the Company
and its peers are calculated using historical daily stock-return data for a period equivalent to the award’s term.
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