Note 11 – Stockholders’ equity and stock-based compensation

Stock option plans

Our stockholders approved the 1994 Incentive Stock Option Plan (the “1994 Plan”) on May 9, 1994. At the time of approval, 13,668,750 shares of our common stock were reserved for issuance under this plan. In 1997, an additional 10,631,250 shares of our common stock were reserved for issuance under this plan, and an additional 1,125,000 shares were reserved for issuance under this plan in 2004. The 1994 Plan terminated in May 2005, except with respect to outstanding awards previously granted there under.

Awards under the plan were either incentive stock options within the meaning of Section 422 of the Internal Revenue Code or nonqualified options. The right to purchase shares under the options vests over a five to ten-year period, beginning on the date of grant. Vesting of ten year awards may accelerate based on the Company’s previous year’s earnings and revenue growth but shares cannot accelerate to vest over a period of less than five years. Stock options must be exercised within ten years from date of grant. Stock options were issued with an exercise price which was equal to the market price of our common stock at the grant date. We estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods. During the year ended December 31, 2012, we did not make any changes in accounting principles or methods of estimates related to the 1994 Plan.

Transactions under all stock option plans are summarized as follows:



	Number of shares under option		Weighted average exercise price
Outstanding at December 31, 2009	5,567,254	$	17.95
Exercised	(2,291,757)	$	17.55
Canceled	(941,049)	$	20.93
Granted	-	$	-
Outstanding at December 31, 2010	2,334,448	$	17.15
Exercised	(932,895)	$	15.94
Canceled	(84,337)	$	16.23
Granted	-	$	-
Outstanding at December 31, 2011	1,317,216	$	18.07
Exercised	(237,146)	$	16.59
Canceled	(26,945)	$	17.07
Granted	-	$	-
Outstanding at December 31, 2012	1,053,125	$	18.44

Options exercisable at December 31:
2010	2,138,886	$	17.07
2011	1,270,775	$	18.06
2012	1,034,559	$	18.44

The aggregate intrinsic value of stock options at exercise, represented in the table above, was $2.4 million, $13.0 million and $12.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. Total unrecognized stock-based compensation expense related to non-vested stock options was approximately $72,600 as of December 31, 2012, related to approximately 18,600 shares with a per share weighted average fair value of $11.79. We anticipate this expense to be recognized over a weighted average period of approximately 1.2 years.



		Outstanding and Exercisable by Price Range as of December 31, 2012
		Options Outstanding				Options Exercisable
	Range of Exercise Prices	Number outstanding as of 12/31/2012	Weighted average remaining contractual life		Weighted average exercise price	Number exerciseable as of 12/31/2012		Weighted average exercise price
$	13.41 - 15.09	243,751	1.15	$	14.14	238,451	$	14.14
$	15.09 - 19.69	108,544	1.19	$	18.30	108,544	$	18.30
$	19.69 - 21.67	700,830	1.22	$	19.95	687,564	$	19.95
$	13.41 - 21.67	1,053,125	1.20	$	18.44	1,034,559	$	18.44

The weighted average remaining contractual life of options exercisable as of December 31, 2012 was 1.2 years. The aggregate intrinsic value of options outstanding as of December 31, 2012 was $7.8 million. The aggregate intrinsic value of options currently exercisable as of December 31, 2012 was $7.6 million. No options were granted in the years ended December 31, 2012, 2011 and 2010.

Restricted stock plan

Our stockholders approved our 2005 Incentive Plan (the “2005 Plan”) on May 10, 2005. At the time of approval, 4,050,000 shares of our common stock were reserved for issuance under this plan, as well as the number of shares which had been reserved but not issued under the 1994 Plan (our incentive stock option plan which terminated in May 2005), and any shares that returned to the 1994 Plan as a result of termination of options or repurchase of shares issued under such plan. The 2005 Plan, administered by the Compensation Committee of the Board of Directors, provided for granting of incentive awards in the form of restricted stock and restricted stock units (“RSUs”) to directors, executive officers and employees of the Company and its subsidiaries. Awards vest over a three, five or ten-year period, beginning on the date of grant. Vesting of ten year awards may accelerate based on the Company’s previous year’s earnings and growth but ten year awards cannot accelerate to vest over a period of less than five years. The 2005 Plan terminated on May 11, 2010, except with respect to outstanding awards previously granted thereunder. There were 3,362,304 shares of common stock that were reserved but not issued under the 1994 Plan and the 2005 Plan as of May 11, 2010.

Our stockholders approved our 2010 Incentive Plan (the “2010 Plan”) on May 11, 2010. At the time of approval, 3,000,000 shares of our common stock were reserved for issuance under this plan, as well as the 3,362,304 shares of common stock that were reserved but not issued under the 1994 Plan and the 2005 Plan as of May 11, 2010, and any shares that are returned to the 1994 Plan and the 2005 Plan as a result of the forfeiture or termination of options or RSUs or repurchases of shares issued under these plans. The 2010 Plan, administered by the Compensation Committee of the Board of Directors, provides for granting of incentive awards in the form of restricted stock and RSUs to employees, directors and consultants of the Company and employees and consultants of any parent or subsidiary of the Company. Awards vest over a three, five or ten-year period, beginning on the date of grant. Vesting of ten year awards may accelerate based on the Company’s previous year’s earnings and growth but ten year awards cannot accelerate to vest over a period of less than five years. At December 31, 2012, there were 3,871,389 shares available for grant under the 2010 Plan.

We estimate potential forfeitures of RSUs and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock compensation expense to be recognized in future periods. During the year ended December 31, 2012, we did not make any changes in accounting principles or methods of estimates related to the 2010 Plan.

Transactions under our Restricted Stock Plans are summarized as follows:



	RSUs
	Number of RSUs		Weighted average grant price
Outstanding at December 31, 2009	3,456,651	$	17.65
Granted	294,030	$	22.60
Earned	(680,188)	$	23.05
Canceled	(74,196)	$	18.47
Outstanding at December 31, 2010	2,996,297	$	17.97
Granted	1,370,666	$	30.14
Earned	(860,598)	$	30.30
Canceled	(84,843)	$	20.82
Outstanding at December 31, 2011	3,421,522	$	22.75
Granted	1,311,105	$	26.81
Earned	(841,918)	$	27.19
Canceled	(85,435)	$	23.15
Outstanding at December 31, 2012	3,805,274	$	24.62

Total unrecognized stock-based compensation expense related to non-vested RSUs was approximately $89.3 million as of December 31, 2012, related to 3,805,274 shares with a per share weighted average fair value of $24.62. We anticipate this expense to be recognized over a weighted average period of approximately 7.4 years.

Employee stock purchase plan

Our employee stock purchase plan permits substantially all domestic employees and employees of designated subsidiaries to acquire our common stock at a purchase price of 85% of the lower of the market price at the beginning or the end of the purchase period. The plan has quarterly purchase periods generally beginning on February 1, May 1, August 1 and November 1 of each year. Employees may designate up to 15% of their compensation for the purchase of common stock under this plan. On May 10, 2011, our stockholders approved an additional 3,000,000 shares for issuance under our employee stock purchase plan, and at December 31, 2012, we had 2,557,655 shares of common stock reserved for future issuance under this plan. During the year ended December 31, 2012, we issued 1,122,483 shares under this plan. The weighted average purchase price of the employees’ purchase rights for these shares was $21.84 per share and was estimated using the Black-Scholes model with the following assumptions:



	2012	2011	2010
Dividend expense yield	0.5%	0.4%	0.4%
Expected life	3 months	3 months	3 months
Expected volatility	40%	44%	25%
Risk-free interest rate	0.1%	0.1%	0.1%

During the year ended December 31, 2012, we did not make any changes in accounting principles or methods of estimates related to the employee stock purchase plan.

Weighted average, grant date fair value of purchase rights granted under the Employee Stock Purchase Plan are as follows:



	Number of Shares		Weighted average fair value
2010	1,011,765	$	4.35
2011	940,703	$	6.56
2012	1,122,483	$	5.93

Authorized Preferred Stock and Preferred Stock Purchase Rights Plan

We have 5,000,000 authorized shares of preferred stock. On January 21, 2004, our Board of Directors designated 750,000 of these shares as Series A Participating Preferred Stock in conjunction with its adoption of a Preferred Stock Rights Agreement (the “Rights Agreement”) and declaration of a dividend of one preferred share purchase right (a “Right”) for each share of common stock outstanding held as of May 10, 2004 or issued thereafter. Each Right will entitle its holder to purchase one one-thousandth of a share of National Instruments’ Series A Participating Preferred Stock at an exercise price of $200, subject to adjustment, under certain circumstances. The Rights Agreement was not adopted in response to any effort to acquire control of National Instruments.

The Rights only become exercisable in certain limited circumstances following the tenth day after a person or group announces acquisitions of or tender offers for 20% or more of our common stock. In addition, if an acquirer (subject to certain exclusions for certain current stockholders of National Instruments, an “Acquiring Person”) obtains 20% or more of our common stock, then each Right (other than the Rights owned by an Acquiring Person or its affiliates) will entitle the holder to purchase, for the exercise price, shares of our common stock having a value equal to two times the exercise price. Under certain circumstances, our Board of Directors may redeem the Rights, in whole, but not in part, at a purchase price of $0.01 per Right. The Rights have no voting privileges and are attached to and automatically traded with our common stock until the occurrence of specified trigger events. The Rights will expire on the earlier of May 10, 2014 or the exchange or redemption of the Rights.

There were not any shares of preferred stock issued and outstanding at December 31, 2012 and December 31, 2011.

Stock repurchases and retirements

From time to time, our Board of Directors has authorized various programs to repurchase shares of our common stock depending on market conditions and other factors. Under such programs, we repurchased a total of 2,089,098 shares of our common stock at a weighted average price of $20.04 per share, in the year ended December 31, 2010. On April 21, 2010, our Board of Directors approved a new share repurchase program that increased the aggregate number of shares of common stock that we are authorized to repurchase from 1,011,147 to 4.5 million. At December 31, 2012, there were 3,932,245 shares remaining available for repurchase under this plan. This repurchase plan does not have an expiration date. We did not repurchase any shares of our common stock under this plan in the years ended December 31, 2012 and December 31, 2011.