Equity Plans

As of August 28, 2014, we had an aggregate of 161 million shares of common stock reserved for the issuance of stock options and restricted stock awards, of which 62 million shares were subject to outstanding awards and 99 million shares were available for future awards. Awards are subject to terms and conditions as determined by our Board of Directors.

Stock Options

Our stock options are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options issued after February 2014 generally expire eight years from the date of grant. Options issued from October 2004 to February 2014 generally expire six years from the date of grant.

Option activity for 2014 is summarized as follows:



	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (In Years)	Aggregate Intrinsic Value
Outstanding at August 29, 2013	71		$	7.41
Granted	12		22.61
Exercised	(32	)	8.27
Cancelled or expired	(3	)	9.27
Outstanding at August 28, 2014	48		10.57		3.8	$	1,078

Exercisable at August 28, 2014	14		$	6.88	2.4	$	362
Expected to vest after August 28, 2014	33		11.92		4.3	692

The weighted-average grant-date fair value per share was $9.64, $3.34 and $3.18 for options granted during 2014, 2013 and 2012, respectively. The total intrinsic value was $421 million, $103 million, and $6 million for options exercised during 2014, 2013 and 2012, 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:



For the year ended	2014		2013		2012
Average expected life in years	4.9		5.1		5.1
Weighted-average expected volatility	48	%	59	%	66	%
Weighted-average risk-free interest rate	1.6	%	0.7	%	0.9	%

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

As of August 28, 2014, there were 13 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 activity for 2014 is summarized as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value Per Share
Outstanding at August 29, 2013	13		$	6.49
Granted	7		21.88
Restrictions lapsed	(6	)	6.29
Cancelled	(1	)	8.75
Outstanding at August 28, 2014	13		15.08

Expected to vest after August 28, 2014	13		$	14.91



For the year ended	2014		2013		2012
Weighted-average grant-date fair values per share	$	21.88	$	6.23	$	5.43
Aggregate fair values at vesting date	115		17		32

Stock-based Compensation Expense



For the year ended	2014		2013		2012
Stock-based compensation expense by caption:
Cost of goods sold	$	39	$	27	$	23
Selling, general and administrative	50		45		47
Research and development	25		18		17
Other	1		1		—
	$	115	$	91	$	87

Stock-based compensation expense by type of award:
Stock options	$	61	$	57	$	57
Restricted stock awards	54		34		30
	$	115	$	91	$	87

Stock-based compensation expense of $9 million and $6 million was capitalized and remained in inventory as of August 28, 2014 and August 29, 2013, respectively. As of August 28, 2014, $275 million of total unrecognized compensation costs, net of estimated forfeitures, related to non-vested awards was expected to be recognized through the fourth quarter of 2018, resulting in a weighted-average period of 1.4 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.)