AMD 2014 Annual Report Download - page 105

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period. The expense for these awards, net of estimated forfeitures, is recorded over the requisite service period
based on the number of Target Shares that are expected to be earned and the achievement of the adjusted non-
GAAP operating income plus interest expense goal during the performance period. The Company estimates the
fair value of these pRSUs using a Monte Carlo simulation model, as the TSR modifier contains a market
condition. The weighted-average grant date fair value per share of these pRSUs for the years ended
December 27, 2014 and December 28, 2013 was $3.80 and $4.07, respectively. The following weighted-average
assumptions, in addition to projections of market conditions, were used to measure the weighted-average fair
value:
2014 2013
Expected volatility ..................................... 46.88% 57.46%
Risk-free interest rate ................................... 0.22% 0.20%
Expected dividends ..................................... — % — %
Expected life .......................................... 1.32 years 1.44 years
Market-based Restricted Stock Units. During 2012, the Company granted restricted stock units with both a
market condition and a service condition (market-based restricted stock units) to the Company’s senior
executives. The market-based condition for these awards requires that AMD common stock maintains a
weighted-average closing price during the three-year vesting period of equal to or greater than $10.00 per share
over any 30-day period. Provided the market-based condition is satisfied and the respective officer remains an
employee of the Company, the grants will vest in three equal annual installments on the applicable vesting date.
The Company estimated the fair value of the market-based restricted stock units using a Monte Carlo
simulation model on the date of grant. As of December 27, 2014, there were 1,313,000 market-based restricted
stock units outstanding with a grant date fair value of $5.2 million.
Valuation and Expense Information
Stock-based compensation expense related to employee stock options, restricted stock and restricted stock
units was allocated in the consolidated statements of operations as follows:
2014 2013 2012
(In millions)
Cost of sales ........................................... $ 3 $ 5 $ 8
Research and development ................................ 44 48 52
Marketing, general, and administrative ....................... 34 38 37
Total stock-based compensation expense, net of tax of $0 ........ $ 81 $ 91 $ 97
During 2014, 2013 and 2012, the Company did not realize any excess tax benefits related to stock-based
compensation and therefore the Company did not record any effects relating to financing cash flows. The
Company did not capitalize stock-based compensation cost as part of the cost of an asset because the cost was
immaterial.
The Company uses the lattice-binomial model in determining the fair value of the employee stock options.
The weighted-average estimated fair value of employee stock options granted for the years ended
December 27, 2014, December 28, 2013 and December 29, 2012 was $1.46, $1.52 and $2.12 per share
respectively, using the following weighted-average assumptions:
2014 2013 2012
Expected volatility ..................................... 53.36% 59.03% 56.24%
Risk-free interest rate ................................... 1.15% 0.79% 0.52%
Expected dividends .................................... — % — % — %
Expected life (in years) ................................. 3.86 3.83 3.79
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