AMD 2007 Annual Report Download - page 141

Table of Contents
Based on the Black-Scholes option pricing model, the weighted-average fair value of rights granted under the Company’s ESPP during 2007, 2006, and
2005, were $3.11, $6.14, and $4.29 per share. The underlying assumptions used in the model for 2007 and 2006 ESPP purchases are outlined in the following
table:
ESPP
2007 2006
Expected life (years) 0.25 0.25
Expected stock price volatility 37.1% 51.1%
Risk-free interest rate 4.92% 4.89%
Pro Forma Disclosures under SFAS 123 for Periods Prior to Fiscal 2006. Prior to fiscal 2006, the Company followed the disclosure-only provisions of
SFAS 123. 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 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 Black-Scholes model 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 for the year ended December 25, 2005 was estimated
assuming no expected dividends and the following weighted-average assumptions:
Year Ended
December 25,
2005
Options ESPP
Expected life (years) 3.00 0.25
Expected stock price volatility 63.9% 40.5%
Risk-free interest rate 3.84% 3.61%
The following table presents the effect on net loss and loss per share as if the Company had applied the fair-value recognition provisions of SFAS 123 to
all of its share-based compensation awards for the year ended December 25, 2005:
2005
(In millions except per
share amounts)
Net income (loss)—as reported $ 165
Add: employee stock-based compensation expense included in reported net income (loss),
net of related tax effects under APB 25 5
Less: employee stock-based compensation expense determined under the fair-value based
method, net of related tax effects 122
Net income (loss)—pro forma $ 48
Basic net income (loss) per common share—as reported $ (0.41)
Diluted net income (loss) per common share—as reported $ 0.40
Basic net income (loss) per common share—pro forma $ 0.12
Diluted net income (loss) per common share—pro forma $ 0.12
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 options
with exercise prices greater than or less than the closing price of its common stock on the grant date during 2005. In addition,
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Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008