AMD 2005 Annual Report Download - page 118

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Table of Contents
Shares Reserved for Issuance. The Company had a total of approximately 18,009,525 shares of common stock reserved as of December 25, 2005 for
issuance under the 2004 Plan and the ESPP, including restricted stock awards.
Stock-Based Compensation—Pro Forma Disclosures. Pursuant to SFAS 123, for pro forma disclosure purposes only, the Company estimates 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 fair
value of traded options that have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective
assumptions including 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 may not 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:
Stock Options ESPP
2005 2004 2003 2005 2004 2003
Expected life (years) 3.00 3.68 3.27 0.25 0.25 0.25
Expected stock price volatility 63.9% 78.3% 82.9% 40.5% 45.2% 63.7%
Risk-free interest rate 3.84% 2.74% 1.99% 3.61% 1.69% 1.49%
The Company granted a total of 8,144,713 stock-based awards during 2005 with exercise prices equal to the closing price of its common stock on the grant
date. The weighted-average exercise price and weighted-average fair value of these awards were $18.42 and $8.07. The Company did not grant any stock-based
awards with exercise prices greater than or less than the closing price of its common stock on the grant date during 2005. In addition, the Company also granted
1,052,401 shares of restricted stock in 2005 at less than the closing price of its common stock on the grant date. The grant price and weighted-average fair value
of these awards were $0 and $21.88.
The Company granted a total of 25,999,480 stock-based awards during 2004 with exercise prices equal to the closing price of its common stock on the
grant date. The weighted-average exercise price and weighted-average fair value of these awards were $14.56 and $8.20. The Company granted a total of 80,265
stock-based awards during 2004 with exercise prices greater than the closing price of its common stock on the grant date. The weighted-average exercise price
and weighted-average fair value of these awards were $14.54 and $6.34. The Company granted 41,000 stock-based awards in 2004 at less than the closing price
of its common stock on the grant date, excluding 43,000 shares of restricted stock granted in 2004 at less than closing price of its common stock on the grant
date. The weighted-average exercise price and weighted-average fair value of these awards were $1.39 and $13.61.
The Company granted a total of 5,566,484 stock-based awards during 2003 with exercise prices equal to the closing price of its common stock on the grant
date. The weighted-average exercise price and weighted-average fair value of these awards were $9.46 and $5.67. The Company granted a total of 8,745
stock-based awards during 2003 with exercise prices greater than the closing price of its common stock on the grant date. The weighted-average exercise price
and weighted-average fair value of these awards were $9.54 and $4.05. The Company did not grant stock-based awards during 2003 with exercise prices less
than the closing price of its common stock on the grant date.
NOTE 12: Other Employee Benefit Plans
Profit Sharing Program. The Company has a profit sharing program to which the Company may authorize quarterly contributions. All employees, other
than officers, who have worked with the Company for three months or more are eligible to participate in this program. Profit sharing expense was approximately
$22 million in 2005, $14 million in 2004 and $4 million in 2003.
113
Source: ADVANCED MICRO DEVIC, 10-K, February 27, 2006