Coach 2007 Annual Report Download - page 39

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For options granted under Coach’s stock option plans prior to July 1, 2003, an active employee can receive a replacement stock option
equal to the number of shares surrendered upon a stock-for-stock exercise. The exercise price of the replacement option equals 100% of the
market value at the date of exercise of the original option and will remain exercisable for the remaining term of the original option.
Replacement stock options generally vest six months from the grant date. Replacement stock options of 16, 1,462 and 5,378 were granted
in fiscal 2008, fiscal 2007 and fiscal 2006, respectively.
Stock Options
A summary of option activity under the Coach stock option plans as of June 28, 2008 and changes during the year then ended is as
follows:
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Outstanding at June 30, 2007 29,376 $ 27.36
Granted 3,732 43.00
Exercised (3,428) 24.84
Forfeited or expired (1,025) 34.94
Outstanding at June 28, 2008 28,655 $ 29.44 6.2 $ 120,072
Vested or expected to vest at June 28, 2008 28,183 $ 29.33 6.0 $ 120,058
Exercisable at June 28, 2008 15,799 $ 26.46 4.9 $ 97,664
The fair value of each Coach option grant is estimated on the date of grant using the Black-Scholes option pricing model and the
following weighted-average assumptions:
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Expected term (years) 2.6 2.2 2.6
Expected volatility 32.9% 29.9% 35.0%
Risk-free interest rate 4.2% 4.9% 4.2%
Dividend yield —% —% —%
The expected term of options represents the period of time that the options granted are expected to be outstanding and is based on
historical experience. Expected volatility is based on historical volatility of the Company’s stock as well as the implied volatility from
publicly traded options on Coach’s stock. The risk free interest rate is based on the zero-coupon U.S. Treasury issue as of the date of the
grant. As Coach does not pay dividends, the dividend yield is 0%.
The weighted-average grant-date fair value of options granted during fiscal 2008, fiscal 2007 and fiscal 2006 was $10.74, $7.12 and
$8.49, respectively. The total intrinsic value of options exercised during fiscal 2008, fiscal 2007 and fiscal 2006 was $65,922, $191,950
and $232,507, respectively. The total cash received from option exercises was $89,356, $112,119 and $86,550 in fiscal 2008, fiscal
2007 and fiscal 2006, respectively, and the actual tax benefit realized for the tax deductions from these option exercises was $25,610,
$69,496 and $88,534, respectively.
At June 28, 2008, $66,232 of total unrecognized compensation cost related to non-vested stock option awards is expected to be
recognized over a weighted-average period of 1.0 year.
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Share Awards
The grant-date fair value of each Coach share award is equal to the fair value of Coach stock at the grant date. The weighted-average
grant-date fair value of shares granted during fiscal 2008, fiscal 2007 and fiscal 2006 was $40.47, $35.09 and $34.17, respectively. The
following table summarizes information about non-vested shares as of and for the year ended June 28, 2008:
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Nonvested at June 30, 2007 1,326 $ 26.10