Starbucks 2000 Annual Report Download - page 27

employee stock purchase plan
The Company has an employee stock purchase plan which provides that eligible employees may
contribute up to 10% of their base earnings, up to $25,000 annually, toward the quarterly purchase of
the Company’s common stock. The employees’ purchase price is 85% of the lesser of the fair market
value of the stock on the first business day or the last business day of the quarterly offering period. No
compensation expense is recorded in connection with the plan. The total number of shares issuable
under the plan is 8,000,000. There were 403,771 shares issued under the plan during fiscal 2000 at
prices ranging from $20.37 to $32.73. There were 492,231 shares issued under the plan during fiscal
1999 at prices ranging from $14.05 to $25.18. There were 271,778 shares issued under the plan during
fiscal 1998 at prices ranging from $15.99 to $19.58. Of the 24,465 employees eligible to participate,
6,708 were participants in the plan as of October 1, 2000.
deferred stock plan
The Company has a Deferred Stock Plan for certain key employees that enables participants in the plan
to defer receipt of ownership of common shares from the exercise of non-qualified stock options. The
minimum deferral period is five years. As of October 1, 2000, receipt of 848,550 shares was deferred
under the terms of this plan. The rights to receive these shares, represented by common stock units, are
included in the calculation of basic and diluted earnings per share as common stock equivalents.
accounting for stock-based compensation
The Company accounts for its stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and its
related interpretations. Accordingly, no compensation expense has been recognized in the financial
statements for employee stock arrangements.
SFAS No. 123, “Accounting for Stock-Based Compensation,” requires the disclosure of pro forma net
income and net income per share as if the Company adopted the fair-value method of accounting for
stock-based awards as of the beginning of fiscal 1996. The fair value of stock-based awards to employees is
calculated using the Black-Scholes option-pricing model with the following weighted average assumptions:
EMPLOYEE STOCK OPTIONS EMPLOYEE STOCK PURCHASE PLAN
2000 1999 1998 2000 1999 1998
Expected life (years) 2 - 6 1.5 - 6 1.5 - 6 0.25 0.25 0.25
Expected volatility 55% 50% 45% 42 - 82% 44 - 66% 37 - 45%
Risk-free interest rate 5.65 - 6.87% 4.60 - 6.21% 5.28 - 6.05% 5.97 - 6.40% 4.26 - 5.63% 5.26 - 5.74%
Expected dividend yield 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
The Company’s valuations are based upon a multiple option valuation approach and forfeitures are
recognized as they occur. The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions, including the expected stock-price
volatility. The Company’s employee stock options have characteristics significantly different from those of
traded options, and changes in the subjective input assumptions can materially affect the fair value estimate.
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