Starbucks 2012 Annual Report Download - page 83

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77
Stock based compensation expense recognized in the consolidated financial statements (in millions):
Fiscal Year Ended Sep 30, 2012 Oct 2, 2011 Oct 3, 2010
Options $ 46.2 $ 60.4 $ 76.8
Restricted Stock Units (“RSUs”) 107.4 84.8 36.8
Total stock-based compensation expense recognized in the
consolidated statement of earnings $ 153.6 $ 145.2 $ 113.6
Total related tax benefit 54.2 51.2 40.6
Total capitalized stock-based compensation included in net
property, plant and equipment and inventories on the
consolidated balance sheets 2.0 2.1 1.9
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 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 2012, 2011, and 2010:
Employee Stock Options
Granted During the Period
Fiscal Year Ended 2012 2011 2010
Expected term (in years) 4.8 5.0 4.7
Expected stock price volatility 38.2% 39.0% 43.0%
Risk-free interest rate 1.0% 1.6% 2.1%
Expected dividend yield 1.5% 1.7% 0.1%
Weighted average grant price $ 44.26 $ 31.46 $ 22.28
Estimated fair value per option granted $ 12.79 $ 9.58 $ 8.50
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. 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.