background image
WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SARs Activity
The share-based compensation liability for SARs is recognized for the portion of fair value for which service has
been rendered at the reporting date. The share-based liability is remeasured at each reporting date, using a binomial
option-pricing model, through the requisite service period. As of June 28, 2013, 1.0 million SARs were outstanding
with a weighted average exercise price of $7.90. There were no SARs granted and all other SARs activity was immate-
rial to the consolidated financial statements for the year ended June 28, 2013.
Fair Value Disclosure -- Binomial Model
The fair value of stock options granted is estimated using a binomial option-pricing model. The binomial model
requires the input of highly subjective assumptions. The Company uses historical data to estimate exercise, employee
termination, and expected stock price volatility within the binomial model. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The fair value of
stock options granted during the three years ended June 28, 2013 was estimated using the following weighted average
assumptions:
2013
2012
2011
Suboptimal exercise factor . . . . . . . . . . . . . . . .
1.90
1.81
1.81
Range of risk-free interest rates . . . . . . . . . . . .
0.14% to 1.96%
0.12% to 1.61%
0.20% to 2.90%
Range of expected stock price volatility . . . . . .
0.36 to 0.53
0.41 to 0.55
0.39 to 0.59
Weighted average expected volatility . . . . . . .
0.49
0.49
0.52
Post-vesting termination rate . . . . . . . . . . . . .
2.16%
2.61%
2.44%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . .
2.53%
--
--
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$15.75
$12.91
$11.42
The weighted average expected term of the Company's stock options granted during 2013, 2012 and 2011 was
4.0 years, 4.9 years and 4.7 years, respectively.
Fair Value Disclosure -- Black-Scholes-Merton Model
The fair value of ESPP purchase rights issued is estimated at the date of grant of the purchase rights using the
Black-Scholes-Merton option-pricing model. The Black-Scholes-Merton option-pricing model requires the input of
highly subjective assumptions such as the expected stock price volatility and the expected period until options are
exercised. Purchase rights under the ESPP are granted on either June 1st or December 1st of each year.
The fair values of all ESPP purchase rights granted on or prior to June 28, 2013 have been estimated at the date
of grant using a Black-Scholes-Merton option-pricing model with the following weighted average assumptions:
ESPP
2013
2012
2011
Option life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.24
1.24
1.25
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.23%
0.22%
0.44%
Stock price volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.42
0.46
0.44
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.61%
--
--
Fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$10.36
$7.29
$8.36
Stock Repurchase Program
On May 21, 2012, the Company announced that the Board of Directors authorized an additional $1.5 billion for
the repurchase of its common stock through May 18, 2017. On September 13, 2012, the Company announced that
76