Estee Lauder 2005 Annual Report Download - page 79

THE EST{E LAUDER COMPANIES INC. 78
Total net compensation income attributable to the grant-
ing of share units, the decrease in value of existing share
units and the granting of stock options to a consultant was
$1.3 million in fiscal 2005. Total net compensation expense
attributable to the granting of share units and the increase
in value of existing share units was $7.8 million and $1.4
million in fiscal 2004 and 2003, respectively.
Share Incentive Plans
The Plans provide for the issuance of 30,750,000 shares to
be awarded in the form of stock options, stock apprecia-
tion rights and other stock awards to key employees and
stock options, stock awards and stock units to non-
employee directors of the Company. As of June 30, 2005,
2,554,200 shares of Class A Common Stock were reserved
and were available to be granted pursuant to the Plans. The
exercise period for all stock options generally may not
exceed ten years from the date of grant. Pursuant to the
Plans, stock option awards in respect of 2,219,300,
2,693,500 and 6,651,200 shares were granted in fiscal
2005, 2004 and 2003, respectively. Generally, the stock
options become exercisable at various times through Feb-
ruary 2009.
In addition to awards made by the Company, certain
outstanding stock options were assumed as part of the
October 1997 acquisition of the companies that sold jane
brand products. Of the 221,200 originally issued options
to acquire shares of the Company’s Class A Common
Stock, 4,100 were outstanding as of June 30, 2005, all of
which were exercisable and will expire through May 2007.
Executive Employment Agreements
The executive employment agreements provide for the
issuance of 11,400,000 shares to be awarded in the form
of stock options and other stock awards to certain key
executives. The Company has reserved 660,400 shares of
its Class A Common Stock pursuant to such agreements as
of June 30, 2005.
A summary of the Company’s stock option programs as of June 30, 2005, 2004 and 2003, and changes during the years
then ended, is presented below:
2005 2004 2003
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
(Shares in thousands)
Outstanding at beginning of year 28,949.8 $36.23 29,542.2 $34.93 24,843.5 $35.10
Granted at fair value 2,219.3 43.31 2,693.5 34.77 6,651.2 32.02
Exercised (3,496.1) 23.05 (2,901.4) 21.18 (1,094.0) 15.16
Cancelled or expired (328.3) 42.07 (384.5) 39.85 (858.5) 43.10
Outstanding at end of year 27,344.7 38.42 28,949.8 36.23 29,542.2 34.93
Options exercisable at year-end 21,422.1 38.66 19,507.8
(a)
36.49 16,425.6 32.31
Weighted-average fair value of options
granted during the year $16.45 $13.07 $12.35
(a) Does not include approximately 1,467,300 shares which became exercisable on July 1, 2004 due to the retirement of an executive on June 30, 2004, based
on the original terms of the option grants.
Summarized information about the Company’s stock options outstanding and exercisable at June 30, 2005 is as follows:
Exercise Price Range Options
(a)
Average Life
(b)
Average Price
(c)
Options
(a)
Average Price
(c)
$ 3.10 4.1 2.3 $3.10 4.1 $3.10
$13.00 to $20.813 469.4 0.4 13.13 469.4 13.13
$21.313 to $30.52 3,383.2 2.4 24.72 3,081.0 24.22
$31.875 to $47.625 17,363.0 6.4 37.09 11,742.6 36.67
$49.75 to $53.50 6,125.0 4.1 51.71 6,125.0 51.71
$ 3.10 to $53.50 27,344.7 5.3 38.42 21,422.1 38.66
(a) Shares in thousands.
(b) Weighted average contractual life remaining in years.
(c) Weighted average exercise price.
ExercisableOutstanding