Equity Plans

As of February 27, 2014, we had an aggregate of 123 million shares of common stock reserved for the issuance of stock options and restricted stock awards, of which 66 million shares were subject to outstanding awards and 57 million shares were available for future awards. Awards are subject to terms and conditions as determined by our Board of Directors.

Stock Options

We granted 9 million and 11 million stock options during the second quarter and first six months of 2014, respectively, with weighted-average grant-date fair values per share of $9.58 and $9.17, respectively. We granted 13 million and 17 million stock options during the second quarter and first six months of 2013, respectively, with weighted-average grant-date fair values per share of $3.35 and $3.27, respectively.

The fair values of option awards were estimated at each grant date using the Black-Scholes option valuation model. The Black-Scholes model requires the input of assumptions, including the expected stock-price volatility and estimated option life. The expected volatilities utilized were based on implied volatilities from traded options on our stock and on historical volatility. The expected lives of options granted were based, in part, on historical experience and on the terms and conditions of the options. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at each grant date. No dividends were assumed in estimated option values. Assumptions used in the Black-Scholes model are presented below:



	Quarter Ended				Six Months Ended
	February 27, 2014		February 28, 2013		February 27, 2014		February 28, 2013
Average expected life in years	4.8		5.1		4.8		5.1
Weighted-average expected volatility	46	%	59	%	47	%	60	%
Weighted-average risk-free interest rate	1.6	%	0.7	%	1.6	%	0.7	%

Restricted Stock and Restricted Stock Units ("Restricted Stock Awards")

As of February 27, 2014, there were 12 million shares of Restricted Stock Awards outstanding, of which 1 million were performance-based Restricted Stock Awards. For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth increments during each year of employment after the grant date. For performance-based Restricted Stock Awards, vesting is contingent upon meeting certain performance goals. Restricted Stock Awards granted for the second quarters and first six months of 2014 and 2013 were as follows:



	Quarter Ended				Six Months Ended
	February 27, 2014		February 28, 2013		February 27, 2014		February 28, 2013
Service-based awards in shares	4		3		5		5
Performance-based awards in shares	—		—		1		1
Weighted-average grant-date fair values per share	$	23.24	$	6.69	$	21.22	$	6.20

Stock-based Compensation Expense



	Quarter Ended				Six Months Ended
	February 27, 2014		February 28, 2013		February 27, 2014		February 28, 2013
Stock-based compensation expense by caption:
Cost of goods sold	$	8	$	7	$	15	$	13
Selling, general and administrative	13		9		24		18
Research and development	6		5		10		9
	$	27	$	21	$	49	$	40

Stock-based compensation expense by type of award:
Stock options	$	14	$	14	$	28	$	27
Restricted stock awards	13		7		21		13
	$	27	$	21	$	49	$	40

As of February 27, 2014, $295 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested awards was expected to be recognized through the second quarter of 2018, resulting in a weighted-average period of 1.5 years. Stock-based compensation expense in the above presentation does not reflect any significant income tax benefits, which is consistent with our treatment of income or loss from our U.S. operations. (See "Income Taxes" note.)