AMD 2007 Annual Report Download - page 248

Spansion Inc.
Notes to Consolidated Financial Statements—(Continued)
The weighted average fair value of the Company’s stock options granted in the year ended December 31, 2006 and December 25, 2005 was $7.82 and
$6.87 per share, respectively. The Company did not provide stock-based compensation to its employees or third parties prior to the IPO on December 15, 2005.
The fair value of each stock option was estimated at the date of grant using a Black-Scholes-Merton option pricing model, with the following assumptions for
grants:
Weighted Average for
the Year Ended
Dec. 31, 2006
Weighted Average
for the Year Ended
Dec. 25, 2005
Expected volatility 58% 66%
Risk-free interest rate 4.82% 4.54%
Expected term (in years) 4.60 4.61
Dividend yield 0% 0%
The Company’s dividend yield is zero because the Company has never paid dividends and does not have plans to do so over the expected life of the stock
options. The expected volatility is based on the Company’s recent historical volatility and the volatilities of the Company’s competitors who are in the same
industry sector with similar characteristics (“guideline” companies) given the lack of historical realized volatility data of the Company. The risk-free interest rate
is based on the yield from U.S. Treasury zero-coupon bond with a remaining term equal to the expected stock option life. The expected term is based on the
“shortcut approach” provided in SAB 107 for developing the estimate of the expected life of a “plain vanilla” stock option. Under this approach, the expected
term is presumed to be the mid-point between the average vesting date and the end of the contractual term.
As of December 31, 2006, the total unrecognized compensation cost related to unvested stock options and RSU awards was approximately $42.1 million
after reduction for estimated forfeitures, and such stock options and RSU awards will generally vest ratably through 2010.
Pro Forma Stock-Based Compensation
The following table illustrates the effect on net loss and net loss per share if the Company had applied the fair value recognition provision of Statement
123 to options granted under the Company’s stock option plan for fiscal 2005 and 2004. The pro forma stock-based compensation includes the impact for AMD
stock options awarded to Spansion employees.
Year Ended
Dec. 25, 2005
Year Ended
Dec. 26, 2004
(in thousands, except
per share amounts)
Net loss—as reported $ (304,116) $ (19,702)
Stock-based compensation expense related to stock-based awards, net of tax (3,421) (1,040)
Net loss, including the effect of stock-based compensation expense $ (307,537) $ (20,742)
Basic and diluted net loss per common share—as reported $ (4.15) $ (0.27)
Basic and diluted net loss per common share—pro forma $ (4.19) $ (0.29)
Source: ADVANCED MICRO DEVIC, 10-K, February 26, 2008