Tesla 2016 Annual Report Download - page 38
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Please find page 38 of the 2016 Tesla annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.InAugust2012,ourBoardofDirectorsgranted5,274,901stockoptionstoourCEO(2012CEOGrant).The2012CEOGrantconsistsoftenvesting
trancheswithavestingschedulebasedentirelyontheattainmentofbothperformanceconditionsandmarketconditions,assumingcontinuedemploymentand
servicetousthrougheachvestingdate.
Eachofthevestingtranchesrequiresacombinationofoneofthetenpre-determinedperformancemilestonesoutlinedbelowandanincrementalincreasein
ourmarketcapitalizationof$4.0billion,ascomparedtotheinitialmarketcapitalizationof$3.2billionmeasuredatthetimeofthe2012CEOGrant.
·SuccessfulcompletionoftheModelXAlphaPrototype;
·SuccessfulcompletionoftheModelXBetaPrototype;
·CompletionofthefirstModelXProductionVehicle;
·SuccessfulcompletionoftheModel3AlphaPrototype;
·SuccessfulcompletionoftheModel3BetaPrototype;
·CompletionofthefirstModel3ProductionVehicle;
·Grossmarginof30%ormoreforfourconsecutivequarters;
·Aggregatevehicleproductionof100,000vehicles;
·Aggregatevehicleproductionof200,000vehicles;and
·Aggregatevehicleproductionof300,000vehicles.
Thetermofthe2012CEOGrantistenyears,soanytranchesthatremainunvestedattheexpirationofthe2012CEOGrantwillbeforfeited.Inaddition,
unvestedoptionswillbeforfeitedifourCEOisnolongerinthatrole,whetherforcauseorotherwise.
Wemeasuredthefairvalueofthe2012CEOGrantusingaMonteCarlosimulationapproachwiththefollowingassumptions:risk-freeinterestrateof
1.65%,expectedtermoftenyears,expectedvolatilityof55%anddividendyieldof0%.
Stock-basedcompensationexpenseassociatedwiththe2012CEOGrantisrecognizedforeachpairofperformanceandmarketconditionsoverthelonger
oftheexpectedachievementperiodoftheperformanceandmarketconditions,beginningatthepointintimethattherelevantperformanceconditionisconsidered
probableofbeingmet.
AsofDecember31,2015,themarketconditionsforsevenvestingtranchesandthefollowingperformancemilestoneswereachievedandapprovedbyour
BoardofDirectors,andthereforefouroftentranchesofthe2012CEOGrantwerevestedasofsuchdate:
·SuccessfulcompletionoftheModelXAlphaPrototype
·SuccessfulcompletionoftheModelXBetaPrototype;and
·CompletionofthefirstModelXProductionVehicle
·Aggregatevehicleproductionof100,000vehicles
AsofDecember31,2015thefollowingtwoperformancemilestoneswereconsideredprobableofachievement:
·SuccessfulcompletionoftheModel3AlphaPrototype;and
·SuccessfulcompletionoftheModel3BetaPrototype
Astheabovethreeperformancemilestoneswereconsideredprobableofachievement,werecordedstock-basedcompensationexpenseof$10.6million,
$25.0millionand$14.5millionfortheyearsendedDecember31,2015,2014and2013.
Additionally,nocashcompensationhaseverbeenreceivedbyourCEOforhisservicestotheCompany.
IncomeTaxes
WearesubjecttofederalandstatetaxesintheUnitedStatesinmanyforeignjurisdictions.Significantjudgmentisrequiredindeterminingourprovisionfor
incometaxes,ourdeferredtaxassetsandliabilitiesandanyvaluationallowancerecordedagainstournetdeferredtaxassets.Wemaketheseestimatesand
judgmentsaboutourfuturetaxableincomethatarebasedonassumptionsthatareconsistentwithourfutureplans.Taxlaws,regulations,andadministrative
practicesmaybesubjecttochangeduetoeconomicorpoliticalconditionsincludingfundamentalchangestothetaxlawsapplicabletocorporatemultinationals.
TheU.S.,manycountriesintheEuropeanUnion,andanumberofothercountriesareactivelyconsideringchangesinthisregard.AsofDecember31,2015,we
hadrecordedafullvaluationallowanceonournetU.S.deferredtaxassetsbecauseweexpectthatitismorelikelythannotthatourU.S.deferredtaxassetswillnot
berealizedintheforeseeablefuture.Shouldtheactualamountsdifferfromourestimates,theamountofourvaluationallowancecouldbemateriallyimpacted.
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