Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Incentive Compensation Plans (Notes)

v3.3.0.814
Stock-Based Incentive Compensation Plans (Notes)
 9 Months Ended
Sep. 26, 2015
Share-based Compensation [Abstract]  
Stock-Based Incentive Compensation Plans
Stock-Based Incentive Compensation Plans
The following table summarizes stock-based compensation expense related to employee stock options and restricted stock units, which is allocated within the Company’s condensed consolidated statements of operations as follows:
 
Three Months Ended
Nine Months Ended
 
September 26,
2015
 
September 27,
2014
 
September 26,
2015
 
September 27,
2014
 
(In millions)
Cost of sales
$
—

 
$
1

 
$
2

 
$
3

Research and development
7

 
11

 
27

 
34

Marketing, general and administrative
6

 
9

 
18

 
28

Stock-based compensation expense, net of tax of $0
$
13

 
$
21

 
$
47

 
$
65


For all periods presented, the Company did not realize any excess tax benefit related to stock-based compensation and therefore did not record any related financing cash flows.
Stock Options
The weighted average assumptions applied in the lattice-binomial model that the Company uses to estimate the fair value of employee stock options are as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
September 26,
2015
 
September 27,
2014
 
September 26,
2015
 
September 27,
2014
Expected volatility
71.71
%
 
51.94
%
 
60.19
%
 
52.88
%
Risk-free interest rate
1.32
%
 
1.16
%
 
1.24
%
 
1.11
%
Expected dividends
0.00
%
 
0.00
%
 
0.00
%
 
0.00
%
Expected life
3.91 years

 
3.86 years

 
3.91 years

 
3.86 years


In the third quarters of 2015 and 2014, the Company granted 5.2 million and 5.6 million shares of employee stock options, respectively, with weighted average grant date fair value per share of $0.94 and $1.59, respectively. For the nine months ended September 26, 2015 and September 27, 2014, the Company granted 5.9 million and 5.7 million employee stock options, respectively, with weighted average grant date fair values per share of $0.96 and 1.59, respectively.
Restricted Stock Units
In the third quarter of 2015, the Company granted 25.0 million restricted stock units including 3.3 million of performance-based restricted stock units (PRSUs) with market conditions referenced below and in the third quarter of 2014, the Company granted 17.7 million restricted stock units including 2.9 million PRSUs, with weighted average grant date fair values per share of $1.79 and $4.12, respectively. For the nine months ended September 26, 2015, the Company granted 33.9 million restricted stock units including 3.3 million PRSUs with market conditions referenced below and 0.8 million PRSUs, with weighted average grant date fair values per share of $1.96. For the nine months ended September 27, 2014, the Company granted 19.9 million restricted stock units including 3.7 million PRSUs, with weighted average grant date fair values per share of $4.11.
Performance-based Restricted Stock Units with Market Conditions
During the third quarter of 2015, the Company granted restricted stock units with both a market condition and a service condition (market-based restricted stock units) to the Company’s senior executives. The number of shares that may be earned is based on three-year compounded annual growth rate milestones related to the Company’s closing stock price that may be attained within the three-year performance period, with the potential payout levels of shares at 50%, 100%, 200% and 250% of the target number of shares granted. Any shares earned pursuant to the attainment of a performance level shall vest 50% upon the compensation committee certification of the attainment of the performance level (provided, however, that no shares may be earned or vest prior to the first anniversary of the grant date) and the remaining 50% shall vest at the end of the Performance Period, subject to the recipient’s continuous employment or service through each such vesting date.
The Company estimated the fair value of the market-based restricted stock units using a Monte Carlo simulation model on the date of grant. As of September 26, 2015, there were 3.3 million market-based restricted stock units with the potential payout level at 100% with a grant date fair value per share of $1.44.