AMD 1998 Annual Report Download - page 247

Notes to Consolidated Financial Statements
RESTRICTED STOCK AWARDS We established the 1987 restricted stock award plan
under which we were authorized to issue up to two million shares of common stock
to employees, subject to terms and conditions determined at the discretion of
the Board of Directors. We entered into agreements to issue 15,000 and 320,609
shares in 1997 and 1996, respectively. The 1987 plan expired in 1997. To date,
we have canceled agreements covering 269,397 shares without issuance and we have
issued 1,714,524 shares pursuant to prior agreements. At December 27, 1998,
agreements covering 253,291 shares were outstanding. Outstanding awards vest
under varying terms within five years.
In 1998, we adopted the 1998 stock incentive plan under which we are authorized
to issue one million shares of common stock to employees who are not covered by
Section 16 of the Securities and Exchange Act of 1934, as amended (the Exchange
Act), subject to terms and conditions determined at the discretion of the Board
of Directors. We did not enter into agreements to issue restricted stock during
1998 under this plan.
SHARES RESERVED FOR ISSUANCE As of December 27, 1998, we had a total of
approximately 41,595,138 shares of common stock reserved for issuance related to
our Convertible Subordinated Notes, the employee stock option plans, the ESPP
and the restricted stock awards.
STOCK-BASED COMPENSATION As permitted under SFAS 123, we have elected to follow
APB 25 and related Interpretations in accounting for stock-based awards to
employees. Pro forma information regarding net income (loss) and net income
(loss) per share is required by SFAS 123 for awards granted after December 31,
1994, as if we had accounted for our stock-based awards to employees under the
fair value method of SFAS 123. We estimated the fair value of our stock-based
awards to employees using a Black-Scholes option pricing model. The Black-
Scholes model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In
addition, the Black-Scholes model requires the input of highly subjective
assumptions including the expected stock price volatility. Because our stock-
based awards to employees have characteristics significantly different from
those of traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of our stock-based awards to employees. The fair value of our stock-based
awards to employees was estimated assuming no expected dividends and the
following weighted-average assumptions:
Options ESPP
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1998 1997 1996 1998 1997 1996
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Expected life (years) 3.33 3.35 3.16 0.25 0.25 0.25
Expected stock price volatility 64.34% 54.69% 48.02% 76.09% 68.41% 47.81%
Risk-free interest rate 5.42% 6.21% 6.44% 5.18% 5.37% 5.29%
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For pro forma purposes, the estimated fair value of our stock-based awards to
employees is amortized over the options' vesting period (for options) and the
three-month purchase period (for stock purchases under the ESPP). Our pro forma
information follows:
(Thousands except per share amounts) 1998 1997 1996
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Net loss - as reported $(103,960) $(21,090) $(68,950)
Net loss - pro forma (129,721) (44,304) (89,451)
Basic and diluted net loss per share - as reported (0.72) (0.15) (0.51)
Basic and diluted net loss per share - pro forma (0.90) (0.32) (0.66)
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Because SFAS 123 is applicable only to awards granted subsequent to December 31,
1994, its pro forma effect will not be fully reflected until approximately 1999.
We granted a total of 4,342,824 stock-based awards during 1998 with exercise
prices equal to the market price of the stock on the grant date. The weighted-
average exercise price and weighted-average fair value of these awards were
$20.16 and $9.80, respectively. We granted a total of 2,060,591 stock-based
awards during 1998 with exercise prices greater than the market price of the
stock
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Source: ADVANCED MICRO DEVIC, 10-K, March 29, 1999