ALTR » Topics » Stock-Based Compensation

This excerpt taken from the ALTR 10-K filed Feb 25, 2009.

Stock-based Compensation

We account for stock-based compensation in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), Share-Based Payment (“SFAS 123(R)”). Under the fair value recognition provisions of SFAS 123(R), stock-based payment expense is estimated at the grant date based on the fair value of the award and is recognized as expense ratably over the requisite service period of the award. Determining the appropriate fair value model and calculating the fair value of stock-based awards requires judgment, including estimating stock price volatility, forfeiture rates and expected life.

Upon adoption of SFAS No. 123(R) on December 31, 2005, we selected the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. Our current estimate of volatility is based on a blend of average historical and implied volatility for publicly traded options on our stock with a term of one year or more. To the extent volatility of our stock price increases in the future, our estimates of the fair value of options granted in the future could increase, thereby increasing stock-based payment expense in future periods. In addition, we apply an expected forfeiture rate when amortizing stock-based payment expense. Our estimate of the forfeiture rate is based primarily upon our historical experience. To the extent we revise this estimate in the future, our stock-based payment expense could be materially impacted in the quarter of revision, as well as in following quarters. We derive the expected term assumption based on our historical settlement experience. In the future, as empirical evidence regarding these input estimates is available to provide more directionally predictive results, we may change or refine our approach of deriving these input estimates. These changes could impact our fair value of stock options granted in the future. See Note 10 – Stock-based compensation to our consolidated financial statements for further information regarding the valuation of stock-based compensation.

This excerpt taken from the ALTR 10-Q filed Nov 8, 2006.

Stock-Based Compensation

 

On December 31, 2005, the first day of our 2006 fiscal year, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for share-based payment awards. We have elected to adopt SFAS 123(R) using the modified prospective transition method. The modified prospective transition method requires us to recognize compensation cost for new and unvested stock options, restricted stock, restricted stock units, and purchase rights under our Employee Stock Purchase Plan shares (“ESPP”) based on estimated fair values. Under the modified prospective transition method, prior period financial statements are not restated.

 

Prior to the adoption of SFAS 123(R) on December 31, 2005, we accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”) , Under APB 25, compensation cost was measured as the excess, if any, of the quoted market price of our stock at the date of grant over the exercise price of the stock option granted. Under APB 25, compensation cost for stock options, if any, was recognized over the vesting period using the straight-line single option method.

 

During the three months ended September 29, 2006, we recorded total stock-based compensation of $15.0 million, compared with $0.1 million for the three months ended September 30, 2005. During the nine months ended September 29, 2006, the stock-based compensation was $52.6 million, compared with $0.2 million for the nine months ended September 30, 2005.

 

At September 29, 2006, unamortized compensation expense related to outstanding unvested stock options, restricted stock units and ESPP shares that are expected to vest was approximately $87 million. This unamortized compensation expense is expected to be recognized over a weighted average period of 2 1/2 years. In addition to the expense for outstanding unvested stock options, restricted stock units and ESPP shares, we will incur significant additional expense during fiscal 2006 related to new awards granted during 2006.

 

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This excerpt taken from the ALTR 10-Q filed Oct 24, 2006.

Stock-Based Compensation

 

On December 31, 2005, the first day of our 2006 fiscal year, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the measurement and recognition of compensation expense for share-based payment awards. We have elected to adopt SFAS 123(R) using the modified prospective recognition method. The modified prospective recognition method requires us to recognize compensation cost for new and unvested stock options, restricted stock, restricted stock units, and employee stock purchase plan shares (“ESPP Shares”). Under the modified prospective recognition method, prior period financial statements are not restated.

 

Prior to the adoption of SFAS 123(R) on December 31, 2005, we accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, or APB No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, compensation cost was measured as the excess, if any, of the quoted market price of our stock at the date of grant over the exercise price of the stock option granted. Under APB No. 25, compensation cost for stock options, if any, was recognized over the vesting period using the straight-line single option method.

 

During the three months ended June 30, 2006, we recorded total stock-based compensation of $18.7 million, compared with $0.1 million for the three months ended July 1, 2005. During the six months ended June 30, 2006, the stock-based compensation was $37.6 million, compared with $0.1 million for the six months ended July 1, 2005.

 

At June 30, 2006, unamortized compensation expense related to outstanding unvested stock options, restricted stock units and ESPP shares that are expected to vest was approximately $90 million. This unamortized compensation expense is expected to be recognized over a weighted average period of 2 1/2 years. In addition to the expense for outstanding unvested stock options, restricted stock units and ESPP shares, we will incur significant additional expense during fiscal 2006 related to new awards granted during 2006.

 

This excerpt taken from the ALTR 10-Q filed Oct 24, 2006.

Stock-Based Compensation

 

On December 31, 2005, the first day of our 2006 fiscal year, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123(R)”), which requires the measurement and recognition of stock-based compensation expense for share-based payment awards. We have elected to adopt SFAS 123(R) using the modified prospective recognition method. The modified prospective recognition method requires us to recognize compensation cost for new and unvested stock options, restricted stock, restricted stock units, and employee stock purchase plan shares (“ESPP Shares”). Under the modified prospective recognition method, prior period financial statements are not restated.

 

Prior to the adoption of SFAS 123(R) on December 31, 2005, we accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion No. 25, or APB No. 25, “Accounting for Stock Issued to Employees.” Under APB No. 25, compensation cost was measured as the excess, if any, of the quoted market price of our stock at the date of grant over the exercise price of the stock option granted. Under APB No. 25, compensation cost for stock options, if any, was recognized over the vesting period using the straight-line single option method.

 

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During the three months ended March 31, 2006, we recorded total stock-based compensation of $18.9 million, compared with $0.1 million for the three months ended April 1, 2005.

 

At March 31, 2006, unamortized compensation expense related to outstanding unvested stock options, restricted stock units and ESPP shares that are expected to vest was approximately $93 million. This unamortized compensation expense is expected to be recognized over a weighted average period of approximately 2 1/2 years. In addition to the expense for outstanding unvested stock options, restricted stock units and ESPP shares, we will incur significant additional expense during fiscal 2006 related to new awards granted during 2006.

 

This excerpt taken from the ALTR 8-K filed Jun 22, 2006.

STOCK-BASED COMPENSATION

San Jose, Calif., June 21, 2006 — Altera Corporation (NASDAQ:ALTR) today announced that it expects to restate its previously issued financial statements to correct errors related to accounting for stock-based compensation expense.

As previously announced, the company’s board of directors has established a special committee of independent directors to review the company’s historical stock option practices and related accounting. The special committee is being assisted by independent legal counsel and outside accounting experts. At this time, the special committee has not completed its work nor reached its final conclusions and is continuing its review.

The special committee has reached a preliminary conclusion that the actual measurement dates for certain stock option grants issued between 1996 and 2000 differ from the recorded grant dates for such awards. As a result, Altera expects to record additional non-cash charges for stock-based compensation expense in prior periods. Altera believes that these charges are material and, accordingly, expects to restate its financial statements for the fiscal years ended 1996 through 2005. The company has not yet determined the tax impact that may result from this matter. Based on information presently available, the company does not anticipate that the restatement will result in a material charge to fiscal year 2005. Because the special committee’s review is still ongoing there may be additional years subject to restatement and the impact to fiscal year 2005 may be different than presently anticipated.

Accordingly, on June 19, 2006, the company’s audit committee, after consultation with management and the special committee, determined that Altera’s financial statements and any related reports of its independent registered public accounting firm for the fiscal years ended 1996 through 2005 should no longer be relied upon. Altera intends to file its restated financial statements and its quarterly report for the period ended March 31, 2006, as soon as practicable after the completion of the special committee’s investigation.


The audit committee has discussed the above matters with the company’s independent registered public accounting firm. However, as the special committee’s review has not been completed, the final conclusions of its review are not yet known to the independent registered public accounting firm.

Additionally, Altera is evaluating Management’s Report on Internal Controls Over Financial Reporting set forth in the company’s Annual Report on Form 10-K for the fiscal year ended December 30, 2005. Although the company has not yet completed its analysis of the impact of this situation on its internal controls over financial reporting, the company has determined that it is likely that it had a material weakness in internal control over financial reporting as of December 30, 2005.

Any stock-based compensation charges incurred as a result of the restatement would have the effect of decreasing reported income or increasing reported loss from operations, and decreasing reported net income or increasing reported net loss, and decreasing reported retained earnings figures contained in Altera’s historical financial statements for the periods mentioned above. Altera does not expect that the anticipated restatement will have any impact on its historical revenues.

Altera expects to announce second quarter revenue results and third quarter revenue guidance on July 24, 2006. The company will not be in a position to announce additional financial results for the second quarter until the special committee has completed its investigation and the company has filed its restated financial statements and its quarterly report for the period ended March 31, 2006.

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