Texas Instruments 2015 Annual Report Download - page 45

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 39
FORM 10-K
We also have an employee stock purchase plan under which options are offered to all eligible employees in amounts based on a
percentage of the employee’s compensation, subject to a cap. Under the plan, the option price per share is 85 percent of the fair market
value on the exercise date, and options have a three-month term.
Total stock-based compensation expense recognized was as follows:
For Years Ended December 31,
2014 2013 2012
Stock-based compensation expense recognized in:
COR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48 $ 49 $ 48
R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 67 71
SG&A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 160 127
Acquisition charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 17
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 277 $ 287 $ 263
These amounts include expenses related to non-qualified stock options, RSUs and stock options offered under our employee stock
purchase plan and are net of expected forfeitures.
We issue awards of non-qualified stock options with graded vesting provisions (e.g., 25 percent per year for four years). Generally, we
recognize the related compensation expense on a straight-line basis over the minimum service period required for vesting of the award,
adjusting for expected forfeiture activity. Awards issued to employees who are retirement eligible or nearing retirement eligibility are
expensed on an accelerated basis.
Our RSUs generally vest four years after the date of grant. We recognize the related compensation expense on a straight-line basis over
the vesting period, adjusting for expected forfeiture activity. Beginning with 2013 grants, RSUs issued to employees who are retirement
eligible or nearing retirement eligibility are expensed on an accelerated basis.
Fair-value methods and assumptions
We account for all awards granted under our various stock-based compensation plans at fair value. We estimate the fair values for
non-qualified stock options using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions.
For Years Ended December 31,
2014 2013 2012
Weighted average grant date fair value, per share . . . . . . . . . . . . . . . . . . . . . . . . . $ 8.13 $ 6.78 $ 8.31
Weighted average assumptions used:
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22% 26% 30%
Expected lives (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 7.4 7.1
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.45% 1.43% 1.40%
Expected dividend yields . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.72% 2.56% 2.10%
We determine expected volatility on all options granted using available implied volatility rates. We believe that market-based measures
of implied volatility are currently the best available indicators of the expected volatility used in these estimates.
We determine expected lives of options based on the historical option exercise experience of our optionees using a rolling 10-year
average. We believe the historical experience method is the best estimate of future exercise patterns currently available.
Risk-free interest rates are determined using the implied yield currently available for zero-coupon U.S. government issues with a
remaining term equal to the expected life of the options.
Expected dividend yields are based on the annualized approved quarterly dividend rate and the current market price of our common
stock at the time of grant. No assumption for a future dividend rate change is included unless there is an approved plan to change the
dividend in the near term.
The fair value per share of RSUs is determined based on the closing price of our common stock on the date of grant.
Our employee stock purchase plan is a discount-purchase plan and consequently the Black-Scholes-Merton option-pricing model is not
used to determine the fair value per share of these awards. The fair value per share under this plan equals the amount of the discount.