Starbucks 2011 Annual Report Download - page 72

Stock based compensation expense recognized in the consolidated financial statements (in millions):
Fiscal Year Ended Oct 2, 2011 Oct 3, 2010 Sep 27, 2009
Options ............................................. $ 60.4 $ 76.8 $61.6
RSUs............................................... 84.8 36.8 16.6
ESPP ............................................... 0.0 0.0 5.0
Total stock-based compensation expense recognized in the
consolidatedstatementofearnings ...................... $145.2 $113.6 $83.2
Totalrelatedtaxbenefit................................. $ 51.2 $ 40.6 $29.3
Total capitalized stock-based compensation included in net
property, plant and equipment and inventories on the
consolidatedbalancesheets............................ $ 2.1 $ 1.9 $ 1.3
Stock Option Plans
Stock options to purchase our common stock are granted at the fair market value of the stock on the date of grant.
The majority of options become exercisable in four equal installments beginning a year from the date of grant and
generally expire 10 years from the date of grant. Options granted in the 2009 exchange program vest over two years
and expire seven years from the date of grant. The 2009 exchange program allowed for a one-time stock option
exchange designed to provide eligible employees the opportunity to exchange certain outstanding underwater stock
options for a lesser amount of new options with lower exercise prices. Options granted to non-employee directors
generally vest over one to three years. Nearly all outstanding stock options are non-qualified stock options.
The fair value of each stock option granted is estimated on the grant date using the Black-Scholes-Merton (“BSM”)
option valuation model. The assumptions used to calculate the fair value of options granted are evaluated and
revised, as necessary, to reflect market conditions and our experience. Options granted are valued using the multiple
option valuation approach, and the resulting expense is recognized over the requisite service period for each
separately vesting portion of the award. Compensation expense is recognized only for those options expected to vest,
with forfeitures estimated at the date of grant based on our historical experience and future expectations.
The fair value of stock option awards was estimated at the grant date with the following weighted average
assumptions for fiscal years 2011, 2010, and 2009 (excludes options granted in the 2009 stock option exchange
program described above):
Employee Stock Options
Granted During the Period
Fiscal Year Ended 2011 2010 2009
Expectedterm(inyears) ........................................ 5.0 4.7 4.9
Expected stock price volatility .................................... 39.0% 43.0% 44.5%
Risk-free interest rate ........................................... 1.6% 2.1% 2.2%
Expecteddividendyield ........................................ 1.7% 0.1% 0.0%
Weightedaveragegrantprice .................................... $31.46 $22.28 $8.97
Estimated fair value per option granted ............................. $ 9.58 $ 8.50 $3.61
The expected term of the options represents the estimated period of time until exercise, and is based on historical
experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of
future employee behavior. Expected stock price volatility is based on a combination of historical volatility of our
stock and the one-year implied volatility of Starbucks traded options, for the related vesting periods. The risk-free
interest rate is based on the implied yield available on US Treasury zero-coupon issues with an equivalent remaining
term. The dividend yield assumption is based on the anticipated cash dividend payouts. We did not pay any cash
dividends prior to fiscal 2010. The amounts shown above for the estimated fair value per option granted are before
the estimated effect of forfeitures, which reduce the amount of expense recorded on the consolidated statements of
earnings.
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