FORM » Topics » Stock Options

This excerpt taken from the FORM 10-Q filed May 7, 2009.

Stock Options

 

The following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:

 

 

 

Three Months Ended

 

 

 

March 28,

 

March 29,

 

 

 

2009

 

2008

 

Stock Options:

 

 

 

 

 

Dividend yield

 

 

 

Expected volatility

 

56.9

%

53.2

%

Risk-free interest rate

 

1.65

%

3.03

%

Expected term (in years)

 

4.75

 

4.75

 

 

These excerpts taken from the FORM 10-K filed Feb 27, 2009.

Stock Options

        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled to vest over four years and expire in either seven or ten 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. In addition, the Company estimates forfeitures when recognizing compensation expense, and adjusts its estimate of forfeitures over the requisite service

99


Table of Contents


FORMFACTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)

Note 9—Stock-Based Compensation (Continued)

period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized as a change in estimate in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

        The following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:

 
  Fiscal Years Ended  
 
  December 27,
2008
  December 29,
2007
  December 30,
2006
 

Stock Options:

                   

Dividend yield

             

Expected volatility

    53.25 %   45.20 %   50.20 %

Risk-free interest rate

    3.04 %   4.47 %   4.89 %

Expected life (in years)

    4.75     4.70     4.80  

        The Company's computation of expected volatility for fiscal 2008, fiscal 2007 and fiscal 2006 was based on a combination of historical and market-based implied volatility from traded options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the volatility expected in future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company applies the simplified method approach as outlined in Staff Accounting Bulletin No. 110. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.

        During fiscal 2008, the Company granted approximately 1,100,000 stock options with an estimated total grant-date fair value of $11.3 million. For fiscal 2007, the Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. As of December 27, 2008, the unamortized stock-based compensation balance related to stock options was $44.2 million after estimated forfeitures, which will be recognized over an estimated period of 1.6 years based on the weighted-average days to vest. Approximately $330,000 of stock-based compensation was capitalized in inventory for fiscal 2008.

Stock Options





        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled
to vest over four years and expire in either seven or ten 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.
In addition, the Company estimates forfeitures when recognizing compensation expense, and adjusts its estimate of forfeitures over the requisite service



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FORMFACTOR, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)



Note 9—Stock-Based Compensation (Continued)




period
based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized as a change in estimate in the period of
change and will also impact the amount of compensation expense to be recognized in future periods.



        The
following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:




































































































 
 Fiscal Years Ended  
 
 December 27,

2008
 December 29,

2007
 December 30,

2006
 

Stock Options:

          

Dividend yield

       

Expected volatility

  53.25% 45.20% 50.20%

Risk-free interest rate

  3.04% 4.47% 4.89%

Expected life (in years)

  4.75  4.70  4.80 




        The
Company's computation of expected volatility for fiscal 2008, fiscal 2007 and fiscal 2006 was based on a combination of historical and market-based implied volatility from traded
options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the
volatility expected in future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company
applies the simplified method approach as outlined in Staff Accounting Bulletin No. 110. The simplified method is based on the vesting period and the contractual term for each grant, or for
each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.



        During
fiscal 2008, the Company granted approximately 1,100,000 stock options with an estimated total grant-date fair value of $11.3 million. For fiscal 2007, the
Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. As of December 27, 2008, the unamortized stock-based
compensation balance related to stock options was $44.2 million after estimated forfeitures, which will be recognized over an estimated period of 1.6 years based on the weighted-average
days to vest. Approximately $330,000 of stock-based compensation was capitalized in inventory for fiscal 2008.





Stock Options





        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled
to vest over four years and expire in either seven or ten 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.
In addition, the Company estimates forfeitures when recognizing compensation expense, and adjusts its estimate of forfeitures over the requisite service



99









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FORMFACTOR, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)



Note 9—Stock-Based Compensation (Continued)




period
based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized as a change in estimate in the period of
change and will also impact the amount of compensation expense to be recognized in future periods.



        The
following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:




































































































 
 Fiscal Years Ended  
 
 December 27,

2008
 December 29,

2007
 December 30,

2006
 

Stock Options:

          

Dividend yield

       

Expected volatility

  53.25% 45.20% 50.20%

Risk-free interest rate

  3.04% 4.47% 4.89%

Expected life (in years)

  4.75  4.70  4.80 




        The
Company's computation of expected volatility for fiscal 2008, fiscal 2007 and fiscal 2006 was based on a combination of historical and market-based implied volatility from traded
options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the
volatility expected in future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company
applies the simplified method approach as outlined in Staff Accounting Bulletin No. 110. The simplified method is based on the vesting period and the contractual term for each grant, or for
each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.



        During
fiscal 2008, the Company granted approximately 1,100,000 stock options with an estimated total grant-date fair value of $11.3 million. For fiscal 2007, the
Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. As of December 27, 2008, the unamortized stock-based
compensation balance related to stock options was $44.2 million after estimated forfeitures, which will be recognized over an estimated period of 1.6 years based on the weighted-average
days to vest. Approximately $330,000 of stock-based compensation was capitalized in inventory for fiscal 2008.





Stock Options





        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled
to vest over four years and expire in either seven or ten 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.
In addition, the Company estimates forfeitures when recognizing compensation expense, and adjusts its estimate of forfeitures over the requisite service



99









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FORMFACTOR, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)



Note 9—Stock-Based Compensation (Continued)




period
based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized as a change in estimate in the period of
change and will also impact the amount of compensation expense to be recognized in future periods.



        The
following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:




































































































 
 Fiscal Years Ended  
 
 December 27,

2008
 December 29,

2007
 December 30,

2006
 

Stock Options:

          

Dividend yield

       

Expected volatility

  53.25% 45.20% 50.20%

Risk-free interest rate

  3.04% 4.47% 4.89%

Expected life (in years)

  4.75  4.70  4.80 




        The
Company's computation of expected volatility for fiscal 2008, fiscal 2007 and fiscal 2006 was based on a combination of historical and market-based implied volatility from traded
options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the
volatility expected in future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the
U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company
applies the simplified method approach as outlined in Staff Accounting Bulletin No. 110. The simplified method is based on the vesting period and the contractual term for each grant, or for
each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.



        During
fiscal 2008, the Company granted approximately 1,100,000 stock options with an estimated total grant-date fair value of $11.3 million. For fiscal 2007, the
Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. As of December 27, 2008, the unamortized stock-based
compensation balance related to stock options was $44.2 million after estimated forfeitures, which will be recognized over an estimated period of 1.6 years based on the weighted-average
days to vest. Approximately $330,000 of stock-based compensation was capitalized in inventory for fiscal 2008.





This excerpt taken from the FORM DEF 14A filed Apr 10, 2008.

Stock Options.

        Exercise Price.    The Compensation Committee determines the exercise price of options at the time the options are granted. The exercise price of stock options that are intended to be exempt from Section 162(m) will not be less than 100% of the fair market value of our common stock on the date of grant. The exercise price of an incentive stock option may not be less than 100% of the fair market value of our common stock on the date of grant of such option. With respect to any awardee who owns stock possessing more than 10% of the voting power of all our classes of stock (including stock of any parent or subsidiary of our company), the exercise price of any incentive stock option may not be less than 110% of the fair market value of our common stock on the date of grant of such option. The exercise price of a non-statutory stock option may not be less than 85% of the fair market value of our common stock on the date of grant of such option. The fair market value of our common stock is generally the closing sales price as quoted on the Nasdaq Global Market.

        Exercise of Option; Form of Consideration.    The Compensation Committee determines when options become exercisable. The means of payment for shares issued on exercise of an option are specified in each Award agreement and the 2002 Plan permits payment to be made by cash, check, other shares of our common stock (with some restrictions), or "cashless exercise". A cashless exercise is a program approved by the Compensation Committee in which payment may be made by delivery of an irrevocable direction to a securities broker to sell shares and to deliver all or part of the sale proceeds to our company in payment of the aggregate exercise price of an option and, if applicable, the amount necessary to satisfy our company's withholding obligations at the minimum statutory withholding rates, including, but not limited to, U.S. federal and state income taxes, payroll taxes and foreign taxes, if applicable.

20


        Term of Option.    The term of an option may be no more than seven years from its date of grant. For options granted on or before February 9, 2006, the term was ten years from the option's date of grant. No option may be exercised after the expiration of its term. With respect to any incentive stock option granted to an awardee who owns stock possessing more than 10% of the voting power of all our classes of stock (including stock of any parent or subsidiary of our company), the term of the incentive stock option may be no more than five years from its date of grant.

        Stock Awards.    The Compensation Committee may grant restricted stock or restricted stock units. The terms and conditions of such an Award are set forth in an Award agreement. The ability to receive a grant and/or the vesting of such an Award may be conditioned upon the achievement of one or more performance goals, including those related to: (a) net revenue and/or net revenue growth; (b) earnings before income taxes and amortization and/or earnings before income taxes and amortization growth; (c) operating income and/or operating income growth; (d) net income and/or net income growth; (e) earnings per share and/or earnings per share growth; (f) total stockholder return and/or total stockholder return growth; (g) return on equity; (h) operating cash flow return on income; (i) adjusted operating cash flow return on income; (j) economic value added; and (k) individual confidential business objectives, as determined by the Compensation Committee in its discretion. Recipients of restricted stock may have voting rights and may receive dividends on the granted shares prior to the time the restrictions lapse.

        Non-Discretionary Grants to Non-Employee Directors.    Each of our non-employee directors is eligible to receive grants under our 2002 Plan. Each non-employee director who becomes a member of our Board of Directors is granted an option to purchase 15,000 shares of our common stock on the date that the director joins our Board. In addition, immediately after each annual meeting of our stockholders, each non-employee director is granted an option to purchase 15,000 shares of our common stock, which is subject to pro-ration if such director has not served as a director for the full 12 months since the preceding option grant to such director.

        Each option granted to a non-employee director has an exercise price equal to the fair market value of our common stock on the date of grant. The options terminate three months after the date the director ceases to be a director or consultant or 12 months if the termination is due to death or disability. All initial options granted to non-employee directors vest over a one-year period at a rate of 1/12th of the total shares granted at the end of each full succeeding month, so long as the non-employee director continuously remains our director or consultant. All succeeding option grants to non-employee directors generally vest as to 1/12th of the total shares granted at the end of each full succeeding month from the later of the date of grant or the date when all outstanding stock options and all outstanding shares issued upon exercise of any stock options granted to the non-employee director prior to the grant of such succeeding grant have fully vested. Each option has a term of seven years from its date of grant. For options granted on or before February 9, 2006, the term was ten years from the option's date of grant. In the event of our dissolution or liquidation or a change in control transaction, all options granted to our non-employee directors will become fully vested and exercisable prior to the consummation of the transaction at such times and on such conditions as the Compensation Committee will determine, and the options will expire if the directors do not exercise the options within three months of the consummation of the transaction.

        Our non-employee directors may elect to receive a restricted stock award or restricted stock unit under our 2002 Plan in lieu of payment of a portion of his or her annual retainer based on the fair market value of our common stock on the date any annual retainer would otherwise be paid. The annual retainer consists of the director or chairperson annual retainer plus any additional retainer paid in connection with service on any committee of our Board or paid for any other reason. A director may make an election for any dollar or percentage amount equal to at least 25% of his or her annual retainer up to a maximum of 100%. A director must make the election in accordance with

21



Section 409A of the Internal Revenue Code. Any amount of the director's annual retainer that is not elected to be received as a restricted stock award or restricted stock unit is payable in cash.

These excerpts taken from the FORM 10-K filed Feb 27, 2008.

Stock Options

        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled to vest over four years and expire in either seven or ten 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. In addition, the Company estimates forfeitures when

84


FORMFACTOR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)

Note 6—Stock-Based Compensation (Continued)

recognizing compensation expense, and will adjust its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized as a change in estimate in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

        The following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:

 
  Years Ended
 
 
  December 29,
2007

  December 30,
2006

 
Stock Options:          
Dividend yield      
Expected volatility   45.2 % 50.2 %
Risk-free interest rate   4.47   4.89 %
Expected life (in years)   4.7   4.8  

        The Company's computation of expected volatility for fiscal 2007 and 2006 was based on a combination of historical and market-based implied volatility from traded options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the volatility expected in future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company applies the simplified method approach as outlined in Staff Accounting Bulleting No. 107. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.

        During fiscal 2007, the Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. For fiscal 2006, the Company granted approximately 2,228,000 stock options with an estimated total grant-date fair value of $41.4 million. As of December 29, 2007, the unamortized stock-based compensation balance related to stock options was $46.4 million after estimated forfeitures, which will be recognized over an estimated period of 1.9 years based on the weighted-average days to vest. Approximately $171,000 of stock-based compensation was capitalized in inventory for the year ended December 29, 2007.

Stock Options





        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled to vest over four years
and expire in either seven or ten 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. In addition, the
Company estimates forfeitures when



84








FORMFACTOR, INC.



NOTES TO CONSOLIDATED FINANCIAL STATEMENT (Continued)



Note 6—Stock-Based Compensation (Continued)



recognizing
compensation expense, and will adjust its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from
such estimates. Changes in estimated forfeitures will be recognized as a change in estimate in the period of change and will also impact the amount of compensation expense to be recognized in future
periods.



        The
following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:



























































 
 Years Ended
 
 
 December 29,

2007

 December 30,

2006

 
Stock Options:     
Dividend yield   
Expected volatility 45.2%50.2%
Risk-free interest rate 4.47 4.89%
Expected life (in years) 4.7 4.8 




        The
Company's computation of expected volatility for fiscal 2007 and 2006 was based on a combination of historical and market-based implied volatility from traded options on the
Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the volatility expected in
future periods. Prior to fiscal 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield
curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company applies the
simplified method approach as outlined in Staff Accounting Bulleting No. 107. The simplified method is based on the vesting period and the contractual term for each grant, or for each
vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.



        During
fiscal 2007, the Company granted approximately 1,734,000 stock options with an estimated total grant-date fair value of $31.5 million. For fiscal 2006, the
Company granted approximately 2,228,000 stock options with an estimated total grant-date fair value of $41.4 million. As of December 29, 2007, the unamortized stock-based
compensation balance related to stock options was $46.4 million after estimated forfeitures, which will be recognized over an estimated period of 1.9 years based on the weighted-average
days to vest. Approximately $171,000 of stock-based compensation was capitalized in inventory for the year ended December 29, 2007.





This excerpt taken from the FORM 10-Q filed Nov 13, 2007.

Stock Options

 

The following weighted average assumptions were used in the estimated grant-date fair value calculations for stock options:

 

 

 

Three Months Ended

 

 

 

March 31,
2007

 

April 1,
2006

 

Stock Options:

 

 

 

 

 

Dividend yield

 

 

 

Expected volatility

 

46.9

%

48.0

%

Risk-free interest rate

 

4.71

%

4.45

%

Expected life (in years)

 

4.75

 

5.67

%

 

This excerpt taken from the FORM 10-K filed Nov 13, 2007.

Stock Options

        The exercise price of each stock option equals the market price of the Company's stock on the date of grant. Most options are scheduled to vest over four years and expire in either seven or ten 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. In addition, the Company estimates forfeitures when recognizing compensation expense, and will adjust its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized as a change in estimate in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

        The following weighted-average assumptions were used in the estimated grant-date fair value calculations for stock options:

 
  Year Ended
December 30,
2006

 
Stock Options:      
Dividend yield    
Expected volatility   50.2 %
Risk-free interest rate   4.89 %
Expected life (in years)   4.8  

        The Company's computation of expected volatility for fiscal 2006 was based on a combination of historical and market-based implied volatility from traded options on the Company's common stock. The Company believes that including market-based implied volatility in the calculation of expected volatility results in a more accurate measure of the volatility expected in future periods. Prior to 2006, the computation of expected volatility was based entirely on historical volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected life of an option. When establishing the expected life of a newly granted option, the Company applies the simplified method approach as outlined in Staff Accounting Bulleting No. 107. The simplified method is based on the vesting period and the contractual term for each grant, or for each vesting-tranche for awards with graded vesting. The mid-point between the vesting date and the expiration date is used as the expected term under this method.

        During fiscal 2006, the Company granted approximately 2,228,000 stock options with an estimated total grant-date fair value of $41.4 million. For the year ended December 30, 2006, the Company recorded stock-based compensation expense related to stock options of $21.2 million. As of December 30, 2006, the unamortized stock-based compensation balance related to stock options was $41.4 million after estimated forfeitures, which will be recognized over an estimated period of 2.1 years based on the weighted-average days to vest. Approximately $796,000 of stock-based compensation was capitalized in inventory for the year ended December 30, 2006.

This excerpt taken from the FORM 10-Q filed May 7, 2007.

Stock Options

The following weighted average assumptions were used in the estimated grant-date fair value calculations for stock options:

 

 

 

Three Months Ended

 

 

 

March 31,
2007

 

April 1,
2006

 

Stock Options:

 

 

 

 

 

Dividend yield

 

 

 

Expected volatility

 

46.9

%

48.0

%

Risk-free interest rate

 

4.71

%

4.45

%

Expected life (in years)

 

4.75

 

5.67

%

 

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