AMD 1999 Annual Report Download - page 167

accounted for its stock-based awards to employees under the fair value method of
SFAS 123. The Company estimated the fair value of its 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
1999 1998 1997 1999 1998 1997
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Expected life (years) 3.45 3.33 3.35 0.25 0.25 0.25
Expected stock price volatility 68.72% 64.34% 54.69% 67.10% 76.09% 68.41%
Risk-free interest rate 5.48% 5.42% 6.21% 4.77% 5.18% 5.37%
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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). Pro forma
information follows:
(Thousands except per share amounts) 1999 1998 1997
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Net loss--as reported $ (88,936) $(103,960) $(21,090)
Net loss--pro forma (122,497) (129,721) (44,304)
Basic and diluted net loss
per share--as reported (0.60) (0.72) (0.15)
Basic and diluted net loss
per share--pro forma (0.83) (0.90) (0.32)
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Because SFAS 123 is applicable only to awards granted subsequent to December 31,
1994, its pro forma effect was not fully reflected until 1999. The Company
granted a total of 4,701,114 stock-based awards during 1999 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 $17.15 and
$8.80, respectively. The Company granted a total of 7,625 stock-based awards
during 1999 with exercise prices greater than the market price of the stock on
the grant date. The weighted-average exercise price and weighted-average fair
value of these awards were $23.83 and $0.07, respectively. The Company granted a
total of 193,966 stock-based awards during 1999 with exercise prices less than
the market price of the stock on the grant date. The weighted-average exercise
price and weighted-average fair value of these awards were $5.51 and $15.31,
respectively. The Company 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. The Company granted a total of
2,060,591 stock-based awards during 1998 with exercise prices greater than the
market price of the stock on the grant date. The weighted-average exercise price
and weighted-average fair value of these awards were $20.44 and $3.51,
respectively. The Company granted a total of 150,990 stock-based awards during
1998 with exercise prices less than market price of the stock on the grant date.
The weighted-average exercise price and weighted-average fair value of these
awards were $3.36 and $17.88, respectively.
The weighted-average fair value of stock purchase rights during 1999, 1998 and
1997 was $4.77 per share, $6.21 per share and $8.42 per share, respectively.
Note 11: Other Employee Benefit Plans
Profit Sharing Program. The Company had a profit sharing program to which the
Board of Directors authorized semiannual contributions. Effective January 2000,
profit sharing is based on the Company's quarterly results, instead of semi-
annual results, and payable quarterly to eligible employees. There were no
profit sharing contributions in 1999. Profit sharing contributions were
approximately $5 million in 1998 and $4 million in 1997.
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Source: ADVANCED MICRO DEVIC, 10-K405, March 21, 2000