SanDisk 2014 Annual Report Download - page 177

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
on the purchase date. The ESPP has 10,000,000 shares reserved for issuance, of which 3,706,401 shares
were available to be issued as of December 28, 2014. In fiscal years 2014, 2013 and 2012, a total of 639,265
shares, 623,887 shares and 684,646 shares of common stock, respectively, were issued under this plan.
Acquired Plans. In connection with the Company’s acquisitions of Fusion-io, SMART Storage,
FlashSoft, Pliant, msystems Ltd. and Matrix Semiconductor, Inc., the Company adopted various equity
incentive plans, which were effective upon completion of the applicable acquisition. Each of these plans
was terminated as of the date of acquisition and no further grants were made under any of these plans
after their termination. Any unvested option grants that were outstanding under these plans as of
December 28, 2014 continue to be governed by their existing terms and may be exercised for shares of the
Company’s common stock. Vested options may be exercised for shares of the Company’s common stock at
any time prior to the expiration of the option term or any earlier termination of those options in
connection with the optionee’s cessation of service with the Company.
Accounting for Share-based Compensation Expense
For share-based awards expected to vest, compensation cost is based on the grant-date fair value. The
Company recognizes compensation expense for the fair values of these awards, which have graded vesting,
on a straight-line basis over the requisite service period of each of these awards, net of estimated
forfeitures.
Valuation Assumptions
The Company estimates the fair value of stock options granted and ESPP shares issued using the
Black-Scholes-Merton option-pricing formula and a single-option award approach. The Company’s
expected term represents the period that the Company’s share-based awards are expected to be
outstanding and was determined based on historical experience for similar awards, giving consideration to
the contractual terms of the share-based awards. The Company’s expected volatility is based on the implied
volatility of its traded options. The Company’s dividend yield is based on the annualized dividend and the
share price at each dividend declaration date. The risk-free interest rate is based on the yield from U.S.
Treasury zero-coupon bonds with an equivalent term.
Option Plan Shares. The fair value of the Company’s stock options granted to employees, officers and
non-employee board members, excluding unvested stock options assumed through acquisitions, was
estimated using the following annual weighted-average assumptions:
Fiscal years ended
December 28, December 29, December 30,
2014 2013 2012
Dividend yield .................................... 1.14% – 1.42% 0% – 1.65% —%
Expected volatility ................................. 0.32 0.37 0.43
Risk-free interest rate ............................... 1.22% 0.74% 0.60%
Expected term .................................... 4.4 years 4.4 years 4.3 years
Estimated annual forfeiture rate ........................ 8.79% 8.51% 8.59%
Weighted-average fair value at grant date .................. $18.96 $16.26 $16.45
RSU Plan Shares. The fair value of the Company’s RSU awards granted, excluding unvested RSU
awards assumed through acquisitions, was valued using the closing price of the Company’s stock price on
the date of grant.
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Annual Report