KLAC » Topics » Stock Options

This excerpt taken from the KLAC 10-Q filed Oct 31, 2008.

Stock Options

Except for options granted to non-employee directors as part of their regular compensation package for service through the end of the first quarter of fiscal year 2008, the Company has granted only restricted stock units under its equity incentive program since July 1, 2006. Therefore, no comparative information is presented in the table below for the three months ended September 30, 2008. The Company estimates the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R) and SEC Staff Accounting Bulleting (“SAB”) No. 107. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

 

     Three months ended
September 30, 2007
 

Stock option plan:

  

Expected stock price volatility

   32 %

Risk free interest rate

   4.8 %

Dividend yield

   0.9 %

Expected life of options (in years)

   4.7  

SFAS No. 123(R) requires the use of option pricing models that were not developed for use in valuing employee stock options. The Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility assumption was based on market-based implied volatility from traded options on the Company’s stock.

 

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Table of Contents

The following table shows the grant-date fair value after estimated forfeitures, weighted-average grant date fair value per share, total intrinsic value of options exercised, total cash received from employees as a result of employee stock option exercises, and tax benefits realized in connection with these exercises of the stock options for the three months ended September 30, 2008 and 2007:

 

(in thousands, except for weighted-average grant date fair value per share)

   Three months ended
September 30,
   2008    2007

Grant-date fair value after estimated forfeitures

   $ —      $ 219

Weighted-average grant date fair value per share

     —        18.25

Total intrinsic value of options exercised

     9,149      50,492

Total cash received from employees as a result of employee stock option exercises

     5,967      96,655

Tax benefits realized in connection with these exercises

     3,217      17,510

As of September 30, 2008, 12.8 million options were exercisable with a weighted-average exercise price of $42.84 and weighted-average remaining contractual term of 4.0 years. The aggregate intrinsic value for the options exercisable as of September 30, 2008 was $6.5 million. As of September 30, 2008, the unrecognized stock-based compensation balance related to stock options was $38.8 million and will be recognized over an estimated weighted-average amortization period of 1.8 years.

The Company settles employee stock option exercises with newly issued common shares except in certain tax jurisdictions where settling such exercises with treasury shares provides the Company or one of its subsidiaries with a tax benefit.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of September 30, 2008 and June 30, 2008:

 

(in thousands)

   September 30,
2008
   June 30,
2008

Inventory

   $ 6,838    $ 6,526

Deferred system profit

   $ 432    $ 829
These excerpts taken from the KLAC 10-K filed Aug 7, 2008.

Stock Options

The Company estimates the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R) and SEC SAB No. 107. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

 

     Year ended June 30,  
       2008         2007         2006    

Stock option plan:

      

Expected stock price volatility

   34 %   34 %   30 %

Risk free interest rate

   4.4 %   4.9 %   4.1 %

Dividend yield

   1.0 %   1.1 %   1.0 %

Expected life of options (in years)

   4.7     4.4     4.6  

SFAS No. 123(R) requires the use of option pricing models that were not developed for use in valuing employee stock options. The Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility assumption was based on market-based implied volatility from traded options on the Company’s stock. The Company believes that implied volatility is reflective of market conditions.

 

71


KLA-TENCOR CORPORATION

Notes to Consolidated Financial Statements—(Continued)

 

The following table shows the grant-date fair value after estimated forfeitures, weighted-average grant date fair value per share, total intrinsic value of options exercised, total cash received from employees as a result of employee stock option exercises, and tax benefits realized in connection with these exercises of the stock options for the fiscal years ended June 30, 2008, 2007 and 2006:

 

(in thousands, except for weighted-average grant date fair value)

   Year ended June 30,
   2008    2007    2006

Grant-date fair value after estimated forfeitures

   $ 426    $ 2,395    $ 68,810

Weighted-average grant date fair value per share

   $ 17.95    $ 11.01    $ 14.17

Total intrinsic value of options exercised

   $ 58,960    $ 111,397    $ 130,176

Total cash received from employees as a result of employee stock option exercises

   $ 115,556    $ 238,364    $ 176,403

Tax benefits realized in connection with these exercises(1)

   $ 28,569    $ 39,512    $ 46,619

 

(1) The $28.6 million includes $7.9 million of tax benefit realized by the Company for the cash bonuses paid during the three months ended March 31, 2008 related to 409A Affected Options.

As of June 30, 2008, 12.9 million options were exercisable with a weighted-average exercise price of $41.91 and weighted-average remaining contractual term of 4.1 years. The aggregate intrinsic value for the options exercisable as of June 30, 2008 was $43.3 million. As of June 30, 2008, the unrecognized stock-based compensation balance related to stock options was $50.2 million and will be recognized over an estimated weighted-average amortization period of 1.7 years.

The Company settles employee stock option exercises with newly issued common shares except in certain tax jurisdictions where settling such exercises with treasury shares provides the Company or one of its subsidiaries with a tax benefit.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of June 30, 2008 and 2007:

 

(in thousands)

   As of June 30,
   2008    2007

Inventory

   $ 6,526    $ 6,229

Deferred system profit

   $ 829    $ 1,386

Stock Options

STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%">The Company estimates the fair value of stock options using a Black-Scholes valuation model, consistent with the provisions of SFAS No. 123(R) and
SEC SAB No. 107. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option valuation model and the straight-line attribution approach with the following weighted-average assumptions:

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 






















































































   Year ended June 30, 
     2008      2007      2006   

Stock option plan:

    

Expected stock price volatility

  34% 34% 30%

Risk free interest rate

  4.4% 4.9% 4.1%

Dividend yield

  1.0% 1.1% 1.0%

Expected life of options (in years)

  4.7  4.4  4.6 

SFAS No. 123(R) requires the use of option pricing models that were not developed for use in
valuing employee stock options. The Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price
volatility assumption was based on market-based implied volatility from traded options on the Company’s stock. The Company believes that implied volatility is reflective of market conditions.

STYLE="margin-top:0px;margin-bottom:0px"> 


71









KLA-TENCOR CORPORATION

ALIGN="center">Notes to Consolidated Financial Statements—(Continued)

 


The following table shows the grant-date fair value after estimated forfeitures, weighted-average
grant date fair value per share, total intrinsic value of options exercised, total cash received from employees as a result of employee stock option exercises, and tax benefits realized in connection with these exercises of the stock options for the
fiscal years ended June 30, 2008, 2007 and 2006:

 

















































































(in thousands, except for weighted-average grant date fair value)

  Year ended June 30,
  2008  2007  2006

Grant-date fair value after estimated forfeitures

  $426  $2,395  $68,810

Weighted-average grant date fair value per share

  $17.95  $11.01  $14.17

Total intrinsic value of options exercised

  $58,960  $111,397  $130,176

Total cash received from employees as a result of employee stock option exercises

  $115,556  $238,364  $176,403

Tax benefits realized in connection with these exercises(1)

  $28,569  $39,512  $46,619

 





(1)The $28.6 million includes $7.9 million of tax benefit realized by the Company for the cash bonuses paid during the three months ended March 31, 2008 related to 409A Affected
Options.

As of June 30, 2008, 12.9 million options were exercisable with a weighted-average exercise price of
$41.91 and weighted-average remaining contractual term of 4.1 years. The aggregate intrinsic value for the options exercisable as of June 30, 2008 was $43.3 million. As of June 30, 2008, the unrecognized stock-based compensation balance
related to stock options was $50.2 million and will be recognized over an estimated weighted-average amortization period of 1.7 years.

The
Company settles employee stock option exercises with newly issued common shares except in certain tax jurisdictions where settling such exercises with treasury shares provides the Company or one of its subsidiaries with a tax benefit.

STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%">The following table shows stock-based compensation capitalized as inventory and deferred system profit as of June 30, 2008 and 2007:

STYLE="font-size:12px;margin-top:0px;margin-bottom:0px"> 





































(in thousands)

  As of June 30,
  2008  2007

Inventory

  $6,526  $6,229

Deferred system profit

  $829  $1,386
This excerpt taken from the KLAC 10-Q filed Apr 28, 2008.

Stock Options

The following table shows the number of options granted and grant-date fair value after estimated forfeitures for the three and nine months ended March 31, 2008 and 2007:

 

      Three months ended
March 31,
   Nine months ended
March 31,

(In thousands)

   2008    2007    2008    2007

Number of options granted

     —        67    24      294

Grant-date fair value after estimated forfeitures

   $ —      $ 242    426    $ 2,188

 

10


As of March 31, 2008, the unrecognized stock-based compensation balance related to stock options was $62.4 million and will be recognized over an estimated weighted average amortization period of 1.9 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of March 31, 2008 and June 30, 2007:

 

(In thousands)

   March 31, 2008    June 30, 2007

Inventory

   $ 6,023    $ 6,229

Deferred system profit

   $ 1,012    $ 1,386
This excerpt taken from the KLAC 10-Q filed Jan 28, 2008.

Stock Options

The following table shows the number of options granted and grant-date fair value after estimated forfeitures for the three and six months ended December 31, 2007 and 2006:

 

(In thousands)

   Three months ended
December 31,
   Six months ended
December 31,
     2007    2006    2007    2006

Number of options granted

     12      —      24      190

Grant-date fair value after estimated forfeitures

   $ 208    $ —      426    $ 1,947

As of December 31, 2007, the unrecognized stock-based compensation balance related to stock options was $74.5 million and will be recognized over an estimated weighted average amortization period of 2.1 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of December 31, 2007 and June 30, 2007:

 

(In thousands)

   December 31, 2007    June 30, 2007

Inventory

   $ 6,507    $ 6,229

Deferred system profit

   $ 1,057    $ 1,386
This excerpt taken from the KLAC 10-Q filed Oct 31, 2007.

Stock Options

The following table shows the number of options granted, grant-date fair value, and stock-based compensation expense related to stock options for the three months ended September 30, 2007 and 2006:

 

     Three months ended
September 30,
(In thousands)    2007    2006

Number of options granted

     12      190

Grant-date fair value after estimated forfeitures

   $ 219    $ 1,947

Stock-based compensation expense

   $ 17,012    $ 30,118

As of September 30, 2007, the unrecognized stock-based compensation balance related to stock options was $88.6 million and will be recognized over an estimated weighted average amortization period of 2.4 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of September 30, 2007 and June 30, 2007:

 

(In thousands)    September 30, 2007    June 30, 2007

Inventory

   $ 6,622    $ 6,229

Deferred system profit

   $ 1,031    $ 1,386
This excerpt taken from the KLAC 10-K filed Aug 20, 2007.

Stock Options

The following table shows the number of options granted, grant-date fair value, and stock-based compensation expense related to stock options for the fiscal years ended June 30, 2007, 2006 and 2005:

 

(in thousands)

   Year ended June 30,
     2007    2006    2005

Number of options granted

     269      4,856      9,625

Grant-date fair value after estimated forfeitures

   $ 2,395    $ 68,810    $ 214,926

Stock-based compensation expense(1)

   $ 82,440    $ 140,447    $ 34,902

(1) Stock-based compensation expense related to options for the fiscal year ended June 30, 2007 is net of a $16.2 million reversal of stock-based compensation charges related to the cancellation of stock options held by the Company’s former Chief Executive Officer.

As of June 30, 2007, the unrecognized stock-based compensation balance related to stock options was $106.0 million and will be recognized over an estimated weighted average amortization period of 2.6 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of June 30, 2007 and 2006:

 

(in thousands)

   As of June 30,
     2007    2006

Inventory

   $ 6,229    $ 6,041

Deferred system profit

   $ 1,386    $ 1,580

 

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KLA-TENCOR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

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

Stock Options

The following table shows the number of options granted, grant-date fair value, and stock-based compensation expense related to stock options for the three and nine months ended March 31, 2007 and 2006:

 

(In millions)    Three months ended
March 31,
   Nine months ended
March 31,
     2007    2006    2007    2006

Number of options granted

     0.1      0.5      0.3      4.6

Grant-date fair value after estimated forfeitures

   $ 0.2    $ 4.4    $ 2.2    $ 49.3

Stock-based compensation expense (1)

   $ 26.1    $ 39.8    $ 64.2    $ 107.8

(1) Stock-based compensation expense related to options for the nine months ended March 31, 2007 is net of a $16 million reversal of stock-based compensation charges for the Company’s former Chief Executive Officer

As of March 31, 2007, the unrecognized stock-based compensation balance related to stock options was $124.2 million and will be recognized over an estimated weighted average amortization period of 2.8 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of March 31, 2007 and June 30, 2006:

 

(In millions)    March 31, 2007    June 30, 2006

Inventory

   $ 6.6    $ 6.0

Deferred system profit

   $ 1.3    $ 1.6

 

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This excerpt taken from the KLAC 10-Q filed Feb 9, 2007.

Stock Options

During the three months ended December 31, 2005, the Company granted approximately 0.1 million stock options with an estimated total grant-date fair value of $1.5 million after estimated forfeitures. There were no stock options granted during the three months ended December 31, 2006. During the six months ended December 31, 2006 and 2005, the Company granted approximately 0.2 million and 4.1 million stock options with an estimated total grant-date fair value of $1.9 million and $45.0 million after estimated forfeitures, respectively. During the three months ended December 31, 2006 and 2005, the Company recorded stock-based compensation expense related to stock options of $8.1 million (net of a $16 million reversal of stock-based compensation charges for the Company’s former Chief Executive Officer) and $33.5 million, respectively. During the six months ended December 31, 2006 and 2005, the Company recorded stock-based compensation expense related to stock options of $38.2 million (net of a $16 million reversal of stock-based compensation charges for the Company’s

 

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former Chief Executive Officer) and $68.0 million, respectively.

During the six months ended December 31, 2006 and 2005, the Company recorded $5.2 million and $7.5 million, respectively, of stock-based compensation expense as a result of the restatement.

As of December 31, 2006, the unrecognized stock-based compensation balance related to stock options was $165.4 million and will be recognized over an estimated weighted average amortization period of 3.0 years.

The following table shows stock-based compensation capitalized as inventory and deferred system profit as of December 31, 2006 and June 30, 2006:

 

(in millions)

   December 31, 2006    June 30, 2006

Inventory

   $ 6.1    $ 6.0

Deferred system profit

   $ 1.4    $ 1.6
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