AMAT » Topics » Stock Options

This excerpt taken from the AMAT 10-Q filed Jun 3, 2009.
Stock Options
 
The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Most options are scheduled to vest over three to four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                                 
    Three Months Ended     Six Months Ended  
    April 26,
    April 27,
    April 26,
    April 27,
 
    2009     2008     2009     2008  
 
Stock Options:
                               
Dividend yield
    2.80 %     1.25 %     2.80 %     1.25 %
Expected volatility
    50 %     33 %     50 %     33 %
Risk-free interest rate
    1.3 %     2.6 %     1.3 %     2.6 %
Expected life (in years)
    3.0       3.9       3.0       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied periodically reviews historical employee exercise behavior with respect to option grants.
 
Applied granted 24,501,000 stock options during the three and six months ended April 26, 2009, respectively, and granted 300 stock options during the three and six months ended April 27, 2008, respectively. The weighted average grant date fair value of options granted during the three and six months ended April 26, 2009 and April 27, 2008 was $2.52 and $5.05, respectively.
 
This excerpt taken from the AMAT 10-Q filed Mar 3, 2009.
Stock Options
 
The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions


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APPLIED MATERIALS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
 
and are fully transferable. Applied’s stock options have characteristics significantly different from those of publicly traded options.
 
There were no stock options granted in the three months ended January 25, 2009 and January 27, 2008.
 
This excerpt taken from the AMAT 10-K filed Dec 12, 2008.
Stock Options
 
The exercise price of each stock option equals the fair market value of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                         
Fiscal Year
  2008     2007     2006  
 
Stock Options:
                       
Dividend yield
    1.24 %     1.12 %     0.73 %
Expected volatility
    32.1 %     31.5 %     36.7 %
Risk-free interest rate
    2.92 %     4.66 %     4.48 %
Expected life (in years)
    3.9       3.9       3.8  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied periodically reviews historical employee exercise behavior with respect to option grants with similar vesting periods.
 
Options outstanding had an aggregate intrinsic value of $0.6 million, $190 million and $165 million at October 26, 2008, October 28, 2007 and October 29, 2006, respectively. The total grant date fair value of options granted during fiscal 2008, 2007 and 2006 was $34,000, $2 million and $54 million, respectively. The total intrinsic value of options exercised during fiscal 2008, 2007 and 2006 was $54 million, $141 million and $57 million, respectively. The total fair value of options that vested during fiscal 2008, 2007 and 2006 was $55 million, $124 million and $256 million, respectively. At October 26, 2008, Applied had $13 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 0.6 years. Cash received from stock option exercises was $328 million, $837 million and $284 million, respectively, during fiscal 2008, 2007 and 2006. The actual tax benefit realized for the tax deductions from options exercised for fiscal 2008, 2007 and 2006 totaled $57 million, $50 million and $24 million, respectively. During fiscal 2006, as part of the acquisition of Applied Films Corporation (Applied Films), Applied assumed outstanding options to purchase Applied Films common stock that, at the acquisition date, had a fair value of $26 million, including $6 million of total unrecognized compensation expense, net of $2 million of estimated forfeitures (see Note 12). The Applied Films stock options assumed by Applied were converted into options to purchase 3 million shares of Applied common stock.
 
This excerpt taken from the AMAT 10-Q filed Aug 29, 2008.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This


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APPLIED MATERIALS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)
 
model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                                 
    Three Months Ended     Nine Months Ended  
    July 27,
    July 29,
    July 27,
    July 29,
 
    2008     2007     2008     2007  
 
Stock Options:
                               
Dividend yield
    1.24 %           1.24 %     1.12 %
Expected volatility
    32 %           32 %     31 %
Risk-free interest rate
    2.9 %           3.0 %     4.7 %
Expected life (in years)
    3.9             3.9       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied periodically reviews historical employee exercise behavior with respect to option grants with similar vesting periods. Applied granted 6,000 stock options during the three months ended July 27, 2008. There were no stock options granted in the three months ended July 29, 2007. Applied granted 7,000 stock options and 313,000 stock options during the nine months ended July 27, 2008 and July 29, 2007, respectively. The weighted average grant date fair value of options granted during the three months ended July 27, 2008 was $5.05, and for options granted during the nine months ended July 27, 2008 and July 29, 2007, the value was $5.05 and $5.11, respectively.
 
This excerpt taken from the AMAT 10-Q filed Jun 4, 2008.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This


4


 

model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                                 
    Three Months Ended     Six Months Ended  
    April 27,
    April 29,
    April 27,
    April 29,
 
    2008     2007     2008     2007  
 
Stock Options:
                               
Dividend yield
    1.25 %     1.09 %     1.25 %     1.12 %
Expected volatility
    33 %     30 %     33 %     31 %
Risk-free interest rate
    2.6 %     4.4 %     2.6 %     4.7 %
Expected life (in years)
    3.9       3.9       3.9       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied periodically reviews historical employee exercise behavior with respect to option grants with similar vesting periods. Applied granted 300 stock options and 35,000 stock options during the three months ended April 27, 2008 and April 29, 2007, respectively, and granted 300 stock options and 313,000 stock options during the six months ended April 27, 2008 and April 29, 2007, respectively. The weighted average grant date fair value of options granted during the three months ended April 27, 2008 and April 29, 2007 was $5.05 and $5.01, respectively, and during the six months ended April 27, 2008 and April 29, 2007 was $5.05 and $5.11, respectively.
 
This excerpt taken from the AMAT 10-Q filed Mar 3, 2008.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and


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are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
         
    Three Months Ended
 
    January 28, 2007  
 
Stock Options:
       
Dividend yield
    1.12 %
Expected volatility
    32 %
Risk-free interest rate
    4.70 %
Expected life (in years)
    3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior with respect to option grants with similar vesting periods. No options were granted in the first quarter of fiscal 2008. There were 278,000 options granted in the three months ended January 28, 2007. The weighted average grant date fair value of options granted during the three months ended January 28, 2007 was $5.12.
 
This excerpt taken from the AMAT 10-K filed Dec 14, 2007.
Stock Options
 
The exercise price of each stock option equals the market price of Applied’s stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years after the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                 
Fiscal Year
  2006     2007  
 
Stock Options:
               
Dividend yield
    0.73 %     1.12 %
Expected volatility
    36.7 %     31.5 %
Risk-free interest rate
    4.48 %     4.66 %
Expected life (in years)
    3.8       3.9  


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APPLIED MATERIALS, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior of option grants with similar vesting periods.
 
Options outstanding had an aggregate intrinsic value of $165 million and $190 million at October 29, 2006 and October 28, 2007, respectively. The weighted average grant date fair value of options granted during fiscal 2006 and fiscal 2007 was $54 million and $2 million, respectively. The total intrinsic value of options exercised during fiscal 2006 and fiscal 2007 was $57 million and $141 million, respectively. The total fair value of options that vested during fiscal 2006 and fiscal 2007 was $256 million and $124 million, respectively. At October 29, 2006, Applied had $121 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 1.1 years. At October 28, 2007, Applied had $48 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 0.8 years. Cash received from stock option exercises was $284 million and $837 million, respectively, during fiscal 2006 and fiscal 2007. The actual tax benefit realized for the tax deductions from options exercised for fiscal 2006 and fiscal 2007 totaled $24 million and $50 million, respectively. During fiscal 2006, as part of the acquisition of Applied Films, Applied assumed outstanding options to purchase Applied Films common stock that, at the acquisition date, had a fair value of $26 million, including $6 million of total unrecognized compensation expense, net of $2 million of estimated forfeitures (see Note 12). The Applied Films stock options assumed by Applied were converted into options to purchase 3 million shares of Applied common stock.
 
This excerpt taken from the AMAT 10-Q filed Aug 30, 2007.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                                 
    Three Months Ended     Nine Months Ended  
    July 30,
    July 29,
    July 30,
    July 29,
 
    2006     2007     2006     2007  
 
Stock Options:
                               
Dividend yield
    1.23 %           0.70 %     1.12 %
Expected volatility
    36 %           37 %     31 %
Risk-free interest rate
    5.0 %           4.5 %     4.7 %
Expected life (in years)
    3.8             3.8       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior with respect to option grants with similar vesting periods. There were no stock options granted in the three months ended July 29, 2007. The weighted average grant date fair value of options granted during the three months ended July 30, 2006 was $5.07, and during the nine months ended July 30, 2006 and July 29, 2007 was $5.94 and $5.11, respectively.
 
This excerpt taken from the AMAT 10-Q filed May 30, 2007.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                                 
    Three Months Ended     Six Months Ended  
    April 30,
    April 29,
    April 30,
    April 29,
 
    2006     2007     2006     2007  
 
Stock Options:
                               
Dividend yield
    0.71 %     1.09 %     0.65 %     1.12 %
Expected volatility
    37 %     30 %     37 %     31 %
Risk-free interest rate
    4.6 %     4.4 %     4.4 %     4.7 %
Expected life (in years)
    3.8       3.9       3.8       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior with respect to option grants with similar vesting periods. The weighted average grant date fair value of options granted during the three months ended April 30, 2006 and April 29, 2007 was $6.09 and $5.01, respectively, and during the six months ended April 30, 2006 and April 29, 2007 was $6.01 and $5.11, respectively.
 
This excerpt taken from the AMAT 10-Q filed Feb 28, 2007.
Stock Options
 
The exercise price of each stock option equals the market price of Applied common stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This


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Table of Contents

 
APPLIED MATERIALS, INC.
 
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS — (Continued)

model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
                 
    Three Months
    Three Months
 
    Ended
    Ended
 
    January 29, 2006     January 28, 2007  
 
Stock Options:
               
Dividend yield
    0.65 %     1.12 %
Expected volatility
    37 %     32 %
Risk-free interest rate
    4.40 %     4.70 %
Expected life (in years)
    3.8       3.9  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior with respect to option grants with similar vesting periods. The weighted average grant date fair value of options granted during the quarters ended January 29, 2006 and January 28, 2007 was $6.01 and $5.12, respectively.
 
This excerpt taken from the AMAT 10-K filed Dec 14, 2006.
Stock Options
 
The exercise price of each stock option equals the market price of Applied’s stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years after the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
         
    Fiscal 2006  
 
Stock Options:
       
Dividend yield
    0.73 %
Expected volatility
    36.7 %
Risk-free interest rate
    4.48 %
Expected life (in years)
    3.8  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, Applied annually reviews historical employee exercise behavior of option grants with similar vesting periods.
 
Options outstanding had an aggregate intrinsic value of $317 million and $165 million at October 30, 2005 and October 29, 2006, respectively. The weighted average grant date fair value of options granted during fiscal 2006 was $54 million. The total intrinsic value of options exercised during fiscal 2006 was $57 million. The total fair value of options that vested during fiscal 2006 was $256 million. At October 29, 2006, Applied had $121 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 1.1 years. Cash received from stock option exercises was $284 million during fiscal 2006. During fiscal 2006, as part of the acquisition of Applied Films Corporation (Applied Films), Applied assumed outstanding options to purchase Applied Films common stock that, at the acquisition date, had a fair value of $26 million, including $6 million of total unrecognized compensation expense, net of $2 million of estimated forfeitures (see Note 13). The total stock options assumed by Applied were converted into options to purchase 3 million shares of Applied common stock.
 
This excerpt taken from the AMAT 10-Q filed Feb 28, 2006.
Stock Options
 
The exercise price of each stock option equals the market price of Applied’s stock on the date of grant. Most options are scheduled to vest over four years and expire no later than seven years from the grant date. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. This model was developed for use in estimating the value of publicly traded options that have no vesting restrictions and are fully transferable. Applied’s employee stock options have characteristics significantly different from those of publicly traded options. The weighted average assumptions used in the model are outlined in the following table:
 
         
    Three Months Ended
 
    January 29, 2006  
 
Stock Options:
       
Dividend yield
    0.65 %
Expected volatility
    37 %
Risk-free interest rate
    4.40 %
Expected life (in years)
    3.8  
 
The computation of the expected volatility assumption used in the Black-Scholes calculations for new grants is based on a combination of historical and implied volatilities. When establishing the expected life assumption, the Company reviews annual historical employee exercise behavior of option grants with similar vesting periods.
 
A summary of the changes in stock options outstanding under Applied’s equity-based compensation plans during the fiscal quarter ended January 29, 2006 is presented below:
 
                                 
                Weighted
       
          Weighted
    Average
       
          Average
    Remaining
    Aggregate
 
          Exercise
    Contractual
    Intrinsic
 
    Shares     Price     Term (Years)     Value  
    (In thousands, except per share amounts)  
 
Options outstanding at October 30, 2005
    200,007     $ 18.67       3.4     $ 317,162  
Granted
    7,107       18.52                  
Exercised
    (6,412 )     13.88                  
Canceled
    (5,872 )     18.58                  
                                 
Options outstanding at January 29, 2006
    194,830       18.82       3.3     $ 279,197  
Options exercisable and expected to become exercisable at January 29, 2006
    189,576       18.34       3.3     $ 264,202  
Options Exercisable at January 29, 2006
    126,502       20.49       2.6     $ 84,204  
 
The weighted average grant date fair value of options granted during the quarter ended January 29, 2006 was $6.01. The total intrinsic value of options exercised during the quarter ended January 29, 2006 was $30 million. The total fair value of options that vested during the quarter ended January 29, 2006 was $2 million. At January 29, 2006, Applied had $231 million of total unrecognized compensation expense, net of estimated forfeitures, related to stock option plans that will be recognized over the weighted average period of 1.1 years. Cash received from stock option exercises was $88 million during the quarter ended January 29, 2006.
 
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