Estee Lauder 2010 Annual Report Download - page 144

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THE EST{E LAUDER COMPANIES INC. 143
The Company is authorized by the Board of Directors to
repurchase up to 88.0 million shares of Class A Common
Stock in the open market or in privately negotiated trans-
actions, depending on market conditions and other
factors. As of June 30, 2010, the cumulative total of
acquired shares pursuant to the authorization was 70.0
million, reducing the remaining authorized share repur-
chase balance to 18.0 million.
NOTE 16
—
STOCK PROGRAMS
As of June 30, 2010, the Company has two active equity
compensation plans which include the Amended and
Restated Fiscal 2002 Share Incentive Plan (the “Fiscal
2002 Plan”) and the Non-Employee Director Share Incen-
tive Plan (collectively, the “Plans”). These Plans currently
provide for the issuance of 24,767,300 shares of Class A
Common Stock, which consist of shares originally pro-
vided for and shares transferred to the Fiscal 2002 Plan
from other inactive plans and employment agreements, to
be granted in the form of stock-based awards to key
employees, consultants and non-employee directors
of the Company. As of June 30, 2010, approximately
7,798,100 shares of Class A Common Stock were reserved
and available to be granted pursuant to these Plans. The
Company may satisfy the obligation of its stock-based
compensation awards with either new or treasury shares.
The Company’s equity compensation awards outstanding
at June 30, 2010 include stock options, performance
share units (“PSU”), restricted stock units (“RSU”) and
share units.
Total net stock-based compensation expense is attrib-
utable to the granting of, and the remaining requisite
service periods of, stock options, PSUs, RSUs and share
units. Compensation expense attributable to net stock-
based compensation for fiscal 2010, 2009 and 2008 was
$57.0 million ($38.0 million after tax), $51.5 million ($34.3
million after tax) and $47.2 million ($31.2 million after tax),
respectively. As of June 30, 2010, the total unrecognized
compensation cost related to nonvested stock-based
awards was $36.0 million and the related weighted-
average period over which it is expected to be recognized
is approximately 1.6 years.
Stock Options
A summary of the Company’s stock option programs as of June 30, 2010 and changes during the fiscal year then ended,
is presented below: Aggregate Weighted-Average
Weighted-Average Intrinsic Value(1) Contractual Life
Shares Exercise Price Per Share (in millions) Remaining in Years
(Shares in thousands)
Outstanding at June 30, 2009 18,914.7 $43.50
Granted at fair value 2,169.5 34.30
Exercised (5,341.4) 38.38
Expired (5,608.3) 51.43
Forfeited (50.9) 40.88
Outstanding at June 30, 2010 10,083.6 39.84 $160.3 6.1
Exercisable at June 30, 2010 6,404.0 39.22 $105.7 4.6
(1) The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.
The exercise period for all stock options generally may not
exceed ten years from the date of grant. Stock option
grants to individuals generally become exercisable in
three substantively equal tranches over a service period
of up to four years. The Company attributes the value of
option awards on a straight-line basis over the requisite
service period for each separately vesting portion of the
award as if the award was, in substance, multiple awards.
The per-share weighted-average grant date fair value of
stock options granted during fiscal 2010, 2009 and 2008
was $10.64, $17.30 and $14.36, respectively. The total
intrinsic value of stock options exercised during fiscal
2010, 2009 and 2008 was $91.8 million, $24.7 million and
$33.2 million, respectively.
The fair value of each option grant was estimated on
the date of grant using the Black-Scholes option-pricing
model with the following assumptions:
YEAR ENDED JUNE 30 2010 2009 2008
Weighted-average expected
stock-price volatility 30% 28% 25%
Weighted-average expected
option life 8 years 8 years 8 years
Average risk-free interest rate 3.1% 3.4% 4.5%
Average dividend yield 2.0% 1.2% 1.2%
2010
30%
8 years
3.1%
2.0%
The Company uses a weighted-average expected stock-
price volatility assumption that is a combination of both
current and historical implied volatilities of the underlying
stock which are obtained from public data sources. For