AMD 2013 Annual Report Download - page 107

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service period. The expense for these awards, net of estimated forfeitures, is recorded over the requisite service
period based on the number of Target Shares that are expected to be earned and the achievement of the non-
GAAP operating income plus interest expense goal during the performance period. The Company estimates the
fair value of the pRSUs using a Monte Carlo simulation model, as the TSR modifier contains a market condition.
The weighted-average grant date fair value per share of these pRSUs was $4.07. The following weighted-average
assumptions, in addition to projections of market conditions, were used to measure the weighted-average fair
value:
Expected volatility ................................................ 57.46%
Risk-free interest rate .............................................. 0.20%
Expected dividends ................................................ — %
Expected life ..................................................... 1.44 years
Market-based Restricted Stock Units and Stock Options. During 2012, the Company granted restricted
stock units with both a market condition and a service condition (market-based restricted stock units) to certain
officers of the Company. The market-based condition for these awards requires that AMD common stock
maintains a weighted-average closing price during the three-year vesting period of equal to or greater than
$10.00 per share over any 30-day period. Provided the market-based condition is satisfied and the respective
officer remains an employee of the Company, the grants will vest in three equal annual installments on the
applicable vesting date.
During 2011, the Company granted market-based restricted stock units and stock options to the Company’s
President and Chief Executive Officer, whom the Company hired in August 2011. The market-based condition
for these awards requires that AMD common stock maintains a weighted-average closing price during the three-
year vesting period of equal to or greater than $11.00 per share over any 30-day period. Provided the market-
based condition is satisfied and the Company’s President and CEO remains an employee of the Company, the
grants will vest in three equal annual installments on the applicable vesting date.
The Company estimated the fair value of market-based restricted stock units and stock options using a
Monte Carlo simulation model on the date of grant. As of December 28, 2013, there were 1,693,000 market-
based restricted stock units and 739,000 market-based stock options outstanding with a grant date fair value of
$6.8 million and $2.0 million, respectively.
Valuation and Expense Information. Stock-based compensation expense related to employee stock
options, restricted stock and restricted stock units was allocated in the consolidated statements of operations as
follows:
2013 2012 2011
(In millions)
Cost of sales .............................................. $ 5 $ 8 $ 6
Research and development ................................... 48 52 46
Marketing, general, and administrative ......................... 38 37 38
Total stock-based compensation expense, net of tax of $0 .......... $91 $97 $90
During 2013, 2012 and 2011, the Company did not realize any excess tax benefits related to stock-based
compensation and therefore the Company did not record any effects relating to financing cash flows. The
Company did not capitalize stock-based compensation cost as part of the cost of an asset because the cost was
immaterial.
The Company uses the lattice-binomial model in determining the fair value of the employee stock options.
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