Estee Lauder 2015 Annual Report Download - page 113

110 THE EST{E LAUDER COMPANIES INC.
Total stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods
of stock options, PSUs, RSUs, PSUs based on total stockholder return, MSUs and share units. Stock-based compensation
expense and related income tax benefits are as follows:
YEAR ENDED JUNE 30 2015 2014 2013
(In millions)
Stock-based compensation expense $165.0 $152.6 $145.8
Income tax benefit 54.1 50.2 47.6
As of June 30, 2015, the total unrecognized compensation cost related to unvested stock-based awards was $107.7 million
and the related weighted-average period over which it is expected to be recognized is approximately two years.
Stock Options
The following is a summary of the Company’s stock option programs as of June 30, 2015 and changes during the fiscal
year then ended:
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, 2014 14,127.8 $41.51
Granted at fair value 2,172.0 76.12
Exercised (2,710.6) 37.41
Expired (33.9) 35.70
Forfeited (118.2) 65.79
Outstanding at June 30, 2015 13,437.1 47.73 $523.1 6.2
Vested and expected to vest at June 30, 2015 13,337.2 47.55 $521.6 6.2
Exercisable at June 30, 2015 9,172.2 37.50 $450.9 5.2
(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 following is a summary of the per-share weight-
ed-average grant date fair value of stock options granted
and total intrinsic value of stock options exercised:
YEAR ENDED JUNE 30 2015 2014 2013
(In millions, except per share data)
Per-share weighted-average
grant date fair value of
stock options granted $22.44 $23.13 $20.30
Intrinsic value of stock
options exercised $114.2 $104.7 $145.8
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 2015 2014 2013
Weighted-average expected
stock-price volatility 28% 33% 34%
Weighted-average expected
option life 7 years 7 years 8 years
Average risk-free interest rate 2.2% 2.5% 1.2%
Average dividend yield 1.1% 1.1% 1.0%
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. The implied volatilities were obtained from publicly
available data sources. For the weighted-average
expected option life assumption, the Company considers
the exercise behavior of past grants and models the
pattern of aggregate exercises. The average risk-free inter-
est rate is based on the U.S. Treasury strip rate for the
expected term of the options and the average dividend
yield is based on historical experience.
Performance Share Units
During fiscal 2015, the Company granted approximately
261,700 PSUs, which will be settled in stock subject to the
achievement of the Company’s net sales, diluted net earn-
ings per common share and return on invested capital
goals for the three fiscal years ending June 30, 2017, all