Employee Stock and Benefit Plans

12 Months Ended

Sep. 29, 2019

Share-based Payment Arrangement [Abstract]

We maintain several equity incentive plans under which we may grant non-qualified stock options, incentive stock options, restricted stock, restricted stock units (“RSUs”) or stock appreciation rights to employees, non-employee directors and consultants. We issue new shares of common stock upon exercise of stock options and the vesting of RSUs. We also have an employee stock purchase plan (“ESPP”).

As of September 29, 2019, there were 52.6 million shares of common stock available for issuance pursuant to future equity-based compensation awards and 12.4 million shares available for issuance under our ESPP.

Stock-based compensation expense recognized in the consolidated financial statements (in millions):



Fiscal Year Ended	Sep 29, 2019		Sep 30, 2018		Oct 1, 2017
Options	$	20.0	$	28.0	$	44.3
RSUs	288.0		222.3		131.7
Total stock-based compensation expense recognized in the consolidated statements of earnings	$	308.0	$	250.3	$	176.0
Total related tax benefit	$	59.3	$	62.4	$	57.6
Total capitalized stock-based compensation included in net property, plant and equipment and inventories on the consolidated balance sheets	$	3.4	$	3.5	$	1.9

Stock Option Plans

We provide stock options as a form of employee compensation, which are primarily time-vested. The majority of time-vested options become exercisable in four equal installments beginning a year from the grant date and generally expire 10 years from the grant date. Options granted to non-employee directors generally vest immediately or one year from grant. All outstanding stock options are non-qualified stock options.

The fair value of stock option awards was estimated at the grant date with the following weighted average assumptions for fiscal 2019, 2018 and 2017:



	Employee Stock Options Granted During the Period
Fiscal Year Ended	2019			2018			2017
Expected term (in years)	4.1			3.6			3.9
Expected stock price volatility	21.6		%	20.5		%	21.6		%
Risk-free interest rate	2.9		%	2.1		%	1.5		%
Expected dividend yield	2.1		%	2.2		%	1.8		%
Weighted average grant price	$	67.33		$	56.56		$	56.12
Estimated fair value per option granted	$	11.06		$	7.32		$	8.56

The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. Expected stock price volatility is based on a combination of historical volatility of our stock and the one-year implied volatility of Starbucks traded options, for the related vesting periods. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The dividend yield assumption is based on our anticipated cash dividend payouts. The amounts shown above for the estimated fair value per option granted are before the estimated effect of forfeitures, which reduce the amount of expense recorded in the consolidated statements of earnings.

Stock option transactions for the year ended September 29, 2019 (in millions, except per share and contractual life amounts):



	Shares Subject to Options		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Outstanding, September 30, 2018	27.3		$	42.13	5.2	$	418
Granted	0.5		67.33
Exercised	(11.6	)	32.46
Expired/forfeited	(1.0	)	56.13
Outstanding, September 29, 2019	15.2		49.45		5.0	592
Exercisable, September 29, 2019	10.2		45.38		3.7	440
Vested and expected to vest, September 29, 2019	14.9		49.33		5.0	583

The aggregate intrinsic value in the table above, which is the amount by which the market value of the underlying stock exceeded the exercise price of outstanding options, is before applicable income taxes and represents the amount optionees would have realized if all in-the-money options had been exercised on the last business day of the period indicated.

As of September 29, 2019, total unrecognized stock-based compensation expense, net of estimated forfeitures, related to nonvested options was approximately $5 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 1.6 years. The total intrinsic value of options exercised was $466 million, $236 million, and $181 million during fiscal 2019, 2018 and 2017, respectively. The total fair value of options vested was $31 million, $53 million, and $40 million during fiscal 2019, 2018 and 2017, respectively.

RSUs

We have both time-vested and performance-based RSUs. Time-vested RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock at the end of a vesting period, subject solely to the employee’s continuing employment. The time-vested RSUs either vest in two or four equal annual installments beginning a year from the grant date. Our performance-based RSUs are awarded to eligible employees and entitle the grantee to receive shares of common stock if we achieve specified performance goals during the performance period and the grantee remains employed through the vesting period.

RSU transactions for the year ended September 29, 2019 (in millions, except per share and contractual life amounts):



	Number of Shares		Weighted Average Grant Date Fair Value per Share		Weighted Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
Nonvested, September 30, 2018	11.2		$	55.62	1.0	$	636
Granted	4.6		68.14
Vested	(4.6	)	55.71
Forfeited/canceled	(2.3	)	59.88
Nonvested, September 29, 2019	8.9		62.56		1.1	788

For fiscal 2018 and 2017, the weighted average fair value per RSU granted was $56.48 and $54.30, respectively. As of September 29, 2019, total unrecognized stock-based compensation expense related to nonvested RSUs, net of estimated forfeitures, was approximately $165 million, before income taxes, and is expected to be recognized over a weighted average period of approximately 2.0 years. The total fair value of RSUs vested was $255 million, $166 million and $182 million during fiscal 2019, 2018 and 2017, respectively.

ESPP

Our ESPP allows eligible employees to contribute up to 10% of their base earnings toward the quarterly purchase of our common stock, subject to an annual maximum dollar amount. The purchase price is 95% of the fair market value of the stock on the last business day of the quarterly offering period. The number of shares issued under our ESPP was 0.4 million in fiscal 2019.

Deferred Compensation Plan

We have a Deferred Compensation Plan for Non-Employee Directors under which non-employee directors may, for any fiscal year, irrevocably elect to defer receipt of shares of common stock the director would have received upon vesting of restricted stock units. The number of deferred shares outstanding related to deferrals made under this plan is not material.

Defined Contribution Plans

We maintain voluntary defined contribution plans, both qualified and non-qualified, covering eligible employees as defined in the plan documents. Participating employees may elect to defer and contribute a portion of their eligible compensation to the plans up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws.

Our matching contributions to all U.S. and non-U.S. plans were $122.1 million, $111.7 million and $101.4 million in fiscal 2019, 2018 and 2017, respectively.