Starbucks 2013 Annual Report Download - page 75

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Note 12: Employee Stock and Benefit Plans
We maintain several equity incentive plans under which we may grant non-qualified stock options, incentive stock options,
restricted stock, restricted stock units (“RSUs”), or stock appreciation rights to employees, non-employee directors and
consultants. We issue new shares of common stock upon exercise of stock options and the vesting of RSUs. We also have an
employee stock purchase plan (“ESPP”).
As of September 29, 2013, there were 18.2 million shares of common stock available for issuance pursuant to future equity-
based compensation awards and 7.8 million shares available for issuance under our ESPP.
Stock based compensation expense recognized in the consolidated financial statements (in millions):
Fiscal Year Ended Sep 29, 2013 Sep 30, 2012 Oct 2, 2011
Options $ 37.1 $ 46.2 $ 60.4
RSUs 105.2 107.4 84.8
Total stock-based compensation expense recognized in the
consolidated statements of earnings $ 142.3 $ 153.6 $ 145.2
Total related tax benefit $ 49.8 $ 54.2 $ 51.2
Total capitalized stock-based compensation included in net
property, plant and equipment and inventories on the consolidated
balance sheets $ 1.8 $ 2.0 $ 2.1
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 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 historical 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 2013, 2012, and 2011:
Employee Stock Options
Granted During the Period
Fiscal Year Ended 2013 2012 2011
Expected term (in years) 4.8 4.8 5.0
Expected stock price volatility 34.0% 38.2% 39.0%
Risk-free interest rate 0.7% 1.0% 1.6%
Expected dividend yield 1.6% 1.5% 1.7%
Weighted average grant price $ 51.23 $ 44.26 $ 31.46
Estimated fair value per option granted $ 12.88 $ 12.79 $ 9.58
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 our 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.
2013 10-K
Starbucks Corporation Form