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TABLE OF CONTENTS
COACH, INC.
Notes to Consolidated Financial Statements
(dollars and shares in thousands, except per share data)
3. SHARE-BASED COMPENSATION – (continued)
that are granted as part of the annual compensation process generally vest ratably over three years. Other stock option and share awards,
granted primarily for retention purposes, are subject to forfeiture until completion of the vesting period, which ranges from one to five years.
The Company issues new shares upon the exercise of stock options, vesting of share units and employee stock purchase.
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. No replacement stock options were granted in fiscal 2011, fiscal
2010 or fiscal 2009.
Stock Options
A summary of option activity under the Coach stock option plans as of July 2, 2011 and changes during the year then ended is as
follows:
Number of
Options
Outstanding
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
Outstanding at July 3, 2010 24,905 $ 30.87
Granted 3,598 39.57
Exercised (11,167) 32.00
Forfeited or expired (504) 39.04
Outstanding at July 2, 2011 16,832 31.73 6.1 $ 576,621
Vested or expected to vest at July 2, 2011 16,774 31.70 6.1 575,205
Exercisable at July 2, 2011 8,324 29.91 4.3 300,328
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:
Fiscal Year Ended
July 2,
2011
July 3,
2010
June 27,
2009
Expected term (years) 3.3 3.0 3.0
Expected volatility 44.9% 49.4% 44.7%
Risk-free interest rate 1.0% 1.7% 2.7%
Dividend yield 1.5% 1.0% 0.0%
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. Grants subsequent to the Company’s April 2009 Board approval to initiate a quarterly dividend included a dividend yield
assumption based on Coach’s annual expected dividend divided by the grant-date share price.
The weighted-average grant-date fair value of options granted during fiscal 2011, fiscal 2010 and fiscal 2009 was $11.41, $9.68 and
$8.36, respectively. The total intrinsic value of options exercised during fiscal 2011, fiscal 2010 and fiscal 2009 was $226,511,
$127,879 and $11,495, respectively. The total cash received from option exercises was $357,344, $208,919 and $9,382 in fiscal 2011,
fiscal 2010 and fiscal 2009,
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