Stock-Based Compensation

12 Months Ended

Oct. 01, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

NOTE 13: STOCK-BASED COMPENSATION

We issue shares under our stock-based compensation plans by issuing Class A stock from treasury. The total number of shares available for future grant under the Tyson Foods, Inc. 2000 Stock Incentive Plan (Incentive Plan) was 15,102,409 at October 1, 2011.

Stock Options

Shareholders approved the Incentive Plan in January 2001. The Incentive Plan is administered by the Compensation Committee of the Board of Directors (Compensation Committee). The Incentive Plan includes provisions for granting incentive stock options for shares of Class A stock at a price not less than the fair value at the date of grant. Nonqualified stock options may be granted at a price equal to, less than or more than the fair value of Class A stock on the date the option is granted. Stock options under the Incentive Plan generally become exercisable ratably over two to five years from the date of grant and must be exercised within 10 years from the date of grant. Our policy is to recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

	Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (in millions)
Outstanding, October 2, 2010		19,373,912		$12.69
Exercised		(4,127,763)		12.26
Canceled		(498,920)		12.78
Granted		3,507,992		16.19
Outstanding, October 1, 2011		18,255,221		13.46		6.1		$246
Exercisable, October 1, 2011		9,465,184		$13.93		4.3		$132

We generally grant stock options once a year; however, we granted stock options twice during fiscal 2010. The weighted average grant-date fair value of options granted in fiscal 2011, 2010 and 2009 was $6.19, $4.76 and $1.29, respectively. The fair value of each option grant is established on the date of grant using a binomial lattice method. We use historical volatility for a period of time comparable to the expected life of the option to determine volatility assumptions. Expected life is calculated based on the contractual term of each grant and takes into account the historical exercise and termination behavior of participants. Risk-free interest rates are based on the five-year Treasury bond rate. Assumptions as of the grant date used in the fair value calculation of each year's grants are outlined in the following table.

	2011		2010		2009
Expected life		6.7 years		6.5 years		5.3 years
Risk-free interest rate		1.5%		1.2%		2.3%
Expected volatility		38.8%		40.4%		34.6%
Expected dividend yield		1.0%		1.3%		3.3%

We recognized stock-based compensation expense related to stock options, net of income taxes, of $12 million, $11 million and $9 million, respectively, during fiscal years 2011, 2010 and 2009, with a $7 million, $7 million and $6 million related tax benefit. We had 6.8 million, 2.2 million and 2.4 million options vest in fiscal years 2011, 2010 and 2009, respectively, with a grant date fair value of $16 million, $13 million and $15 million, respectively.

In fiscal years 2011, 2010 and 2009, we received cash of $51 million, $31 million and $1 million, respectively, for the exercise of stock options. Shares are issued from treasury for stock option exercises. The related tax benefit realized from stock options exercised during fiscal years 2011, 2010 and 2009, was $10 million, $5 million and $0, respectively. The total intrinsic value of options exercised in fiscal years 2011, 2010 and 2009, was $26 million, $12 million and $0, respectively. Cash flows resulting from tax deductions in excess of the compensation cost of those options (excess tax deductions) are classified as financing cash flows. We realized $5 million, $3 million and $0, respectively, in excess tax deductions during fiscal years 2011, 2010 and 2009, respectively. As of October 1, 2011, we had $26 million of total unrecognized compensation cost related to stock option plans that will be recognized over a weighted average period of 1.4 years.

Restricted Stock

We issue restricted stock at the market value as of the date of grant, with restrictions expiring over periods through 2014. Unearned compensation is recognized over the vesting period for the particular grant using a straight-line method.

	Number of Shares		Weighted Average Grant- Date Fair Value Per Share		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (in millions)
Nonvested, October 2, 2010		3,601,614		$14.55
Granted		377,423		17.38
Dividends		28,000		17.92
Vested		(913,954)		15.12
Forfeited		(122,781)		14.74
Nonvested, October 1, 2011		2,970,302		$14.70		1.2		$52

As of October 1, 2011, we had $14 million of total unrecognized compensation cost related to restricted stock awards that will be recognized over a weighted average period of 1.2 years.

We recognized stock-based compensation expense related to restricted stock, net of income taxes, of $7 million, $8 million and $10 million for years 2011, 2010 and 2009, respectively. The related tax benefit for fiscal years 2011, 2010 and 2009 was $5 million, $5 million and $7 million, respectively. We had 0.9 million, 1.8 million and 0.7 million, respectively, restricted stock awards vest in fiscal years 2011, 2010 and 2009, with a grant date fair value of $14 million, $30 million and $11 million.

Performance-Based Shares

In July 2003, our Compensation Committee began authorizing us to award performance-based shares of our Class A stock to certain senior executives. These awards are typically granted on the first business day of our fiscal year. The vesting of the performance-based shares is generally over three years and each award is subject to the attainment of goals determined by the Compensation Committee prior to the date of the award. We review progress toward the attainment of goals each quarter during the vesting period. However, the attainment of goals can be determined only at the end of the vesting period. If the shares vest, the ultimate cost will be equal to the Class A stock price on the date the shares vest multiplied by the number of shares awarded for all performance grants with other than market criteria. For grants with market performance criteria, the ultimate expense will be the fair value of the probable shares to vest regardless if the shares actually vest. Total expense recorded related to performance-based shares was not material for fiscal 2011, 2010 and 2009.