Starbucks 2002 Annual Report Download - page 18

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Note 12: Employee Stock and Benefit Plans
Stock Option Plan
The Company maintains several stock option plans under which the Company may grant incentive stock options and non-qualified
stock options to employees, consultants and non-employee directors. Stock options have been granted at prices at or above the fair
market value on the date of grant. Options vest and expire according to terms established at the grant date.
The following summarizes all stock option transactions from October 3, 1999, through September 29, 2002:
Weighted Weighted
Average Shares Average
Shares Exercise Subject to Exercise
Subject to Price Exercisable Price
Options Per Share Options Per Share
Outstanding, October 3, 1999 45,141,102 $ 8.42 24,161,650 $ 6.78
Granted 9,410,330 12.42
Exercised (8,943,570) 6.54
Cancelled (3,718,136) 10.71
Outstanding, October 1, 2000 41,889,726 9.55 20,330,740 7.82
Granted 9,907,292 20.48
Exercised (6,289,892) 7.45
Cancelled (2,496,195) 14.22
Outstanding, September 30, 2001 43,010,931 12.13 24,407,135 9.16
Granted 10,262,709 15.79
Exercised (9,830,136) 9.29
Cancelled (2,983,701) 15.15
Outstanding, September 29, 2002 40,459,803 $ 13.55 20,975,598 $ 11.07
As of September 29, 2002, there were 34.8 million shares of common stock available for issuance pursuant to future stock option grants.
Additional information regarding options outstanding as of September 29, 2002, is as follows:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Contractual Exercise Exercise
Exercise Prices Shares Life (Years) Price Shares Price
$2.84 - $ 9.20 9,762,067 4.05 $ 7.45 9,250,255 $ 7.36
9.21 - 11.63 9,577,220 6.47 11.07 6,768,224 10.95
11.88 - 14.80 9,991,522 8.50 14.37 1,539,580 13.00
15.34 - 20.19 8,546,478 8.10 19.70 2,389,383 19.67
20.25 - 25.11 2,582,516 8.70 22.34 1,028,156 22.26
$2.84 - $ 25.11 40,459,803 6.87 $ 13.55 20,975,598 $ 11.07
Employee Stock Purchase Plans
The Company has an employee stock purchase plan which
provides that eligible employees may contribute up to 10% of
their base earnings towards the quarterly purchase of the
Company’s common stock. The employee’s purchase price is
85% of the lesser of the fair market value of the stock on the
first business day or the last business day of the quarterly offering
period. Employees may purchase shares having a fair market
value of up to $25,000 (measured as of the first day of each
quarterly offering period for each calendar year). No
compensation expense is recorded in connection with the plan.
The total number of shares issuable under the plan is 16.0
million.There were 991,742 shares issued under the plan during
fiscal 2002 at prices ranging from $12.58 to $19.81.There were
813,635 shares issued under the plan during fiscal 2001 at prices
ranging from $12.70 to $18.28. There were 807,542 shares
issued under the plan during fiscal 2000 at prices ranging from
$10.19 to $16.36.The plan has purchased a total of 4.9 million
shares since inception, leaving 11.1 million shares available for
future issuance. Of the 32,950 employees eligible to participate,
9,126 were participants in the plan as of September 29, 2002.
Starbucks has an additional employee stock purchase plan
which allows eligible United Kingdom employees to save
towards the purchase of the Company’s common stock. The
plan is in compliance with applicable tax laws in the United
Kingdom. The employee’s purchase price is 85% of the fair
value of the stock on the first business day of a three-year
offering period. No compensation expense was recorded in
connection with the plan during fiscal 2002.The total number
of shares issuable under the plan is 600,000, none of which
have been issued as of September 29, 2002.
Deferred Stock Plan
The Company has a deferred stock plan for certain key
employees that enables participants in the plan to defer receipt
of ownership of common shares from the exercise of non-
qualified stock options. The minimum deferral period is five
years. As of September 29, 2002, receipt of 1,697,100 shares
was deferred under the terms of this plan.The rights to receive
these shares, represented by common stock units, are included
in the calculation of basic and diluted earnings per share as
common stock equivalents.
Accounting for Stock-based Compensation
As permitted under SFAS No. 123, “Accounting for Stock-
Based Compensation,” the Company accounts for stock-based
compensation in accordance with APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and its related
interpretations.Accordingly, because the grant price equals the
market price on the date of grant, no compensation expense is
recognized for stock options issued to employees.
Had compensation cost for the Company’s stock options been
recognized based upon the estimated fair value on the grant
date under the fair value methodology prescribed by SFAS No.
123, the Company’s net earnings and earnings per share would
have been as follows (in thousands, except earnings per share):
Fiscal year ended Pro Forma
As Under SFAS
Reported No. 123
September 29, 2002:
Net earnings $ 215,073 $ 177,627
Net earnings per common share:
Basic $ 0.56 $ 0.46
Diluted $ 0.54 $ 0.45
September 30, 2001:
Net earnings $ 181,210 $ 140,675
Net earnings per common share:
Basic $ 0.48 $ 0.37
Diluted $ 0.46 $ 0.36
October 1, 2000:
Net earnings $ 94,564 $ 66,241
Net earnings per common share:
Basic $ 0.25 $ 0.18
Diluted $ 0.24 $ 0.17