Employee Equity Incentive Plans
|12 Months Ended|
Dec. 30, 2017
|Employee Benefits and Share-based Compensation, Noncash [Abstract]|
|Employee Equity Incentive Plans [Text Block]||
Note 19: Employee Equity Incentive Plans
Our equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees and align stockholder and employee interests. Our plans include our 2006 Equity Incentive Plan (the 2006 Plan) and our 2006 Stock Purchase Plan.
In May 2017, our stockholders approved an extension of the expiration date of the 2006 Plan to June 2020 and authorized an additional 33 million shares for issuance under the plan. Under the 2006 Plan, 786 million shares of common stock have been authorized for issuance as equity awards to employees and non-employee directors through June 2020. As of December 30, 2017, 215 million shares of common stock remained available for future grants.
Under the 2006 Plan, we grant RSUs and previously granted stock options. We grant RSUs with a service condition, as well as RSUs with both a market condition and a service condition (market-based RSUs), which we call outperformance stock units (OSUs), and which are granted to a group of senior officers, employees, and non-employee directors. For OSUs granted in 2017, the number of shares of our common stock to be received at vesting will range from 0% to 200% of the target grant amount, based on total stockholder return (TSR) of our common stock measured against the benchmark TSR of the S&P 500 IT Sector Index over a three-year period. TSR is a measure of stock price appreciation plus any dividends paid in this performance period. As of December 30, 2017, 9.2 million OSUs were outstanding. These OSUs generally vest three years and one month from the grant date, and OSUs granted prior to 2017 accrue dividend equivalents. Other RSU awards and option awards generally vest over four years from the grant date. Stock options generally expire seven years from the date of grant.
Share-based compensation recognized in 2017 was $1.4 billion ($1.4 billion in 2016 and $1.3 billion in 2015), which includes $71 million of cash-settled awards in connection with the Mobileye acquisition.
The total share-based compensation cost capitalized as part of inventory as of December 30, 2017 was $49 million ($44 million as of December 31, 2016 and $49 million as of December 26, 2015). During 2017, the tax benefit that we realized for the tax deduction from share-based awards totaled $520 million ($616 million in 2016 and $533 million in 2015).
We estimate the fair value of RSUs with a service condition using the value of our common stock on the date of grant, reduced by the present value of dividends expected to be paid on our shares of common stock prior to vesting. We estimate the fair value of OSUs using a Monte Carlo simulation model on the date of grant.
We use the Black-Scholes option pricing model to estimate the fair value of rights to acquire shares of common stock granted under the 2006 Stock Purchase Plan on the date of grant. We based the weighted average estimated value of RSU and OSU grants, and rights granted under the 2006 Stock Purchase Plan, on the weighted average assumptions for each period as follows:
We base the expected volatility for rights granted under the 2006 Stock Purchase Plan on implied volatility. We base expected volatility for OSUs on historical volatility.
RESTRICTED STOCK UNIT AWARDS
RSU activity in 2017 was as follows:
The aggregate fair value of awards that vested in 2017 was $1.6 billion ($1.6 billion in 2016 and $1.5 billion in 2015), which represents the market value of our common stock on the date that the RSUs vested. The grant-date fair value of awards that vested in 2017 was $1.1 billion ($1.3 billion in 2016 and $1.1 billion in 2015). The number of RSUs vested includes shares of common stock that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. RSUs that are expected to vest are net of estimated future forfeitures.
As of December 30, 2017, unrecognized compensation costs related to RSUs granted under our equity incentive plans were $2.0 billion. We expect to recognize those costs over a weighted average period of 1.3 years.
STOCK PURCHASE PLAN
The 2006 Stock Purchase Plan allows eligible employees to purchase shares of our common stock at 85% of the value of our common stock on specific dates. Under the 2006 Stock Purchase Plan, 373 million shares of common stock are authorized for issuance through August 2021. As of December 30, 2017, 150 million shares of common stock remained available for issuance.
Employees purchased 14.5 million shares of common stock in 2017 for $432 million under the 2006 Stock Purchase Plan (16.5 million shares of common stock for $415 million in 2016 and 15.8 million shares of common stock for $421 million in 2015). As of December 30, 2017, unrecognized share-based compensation costs related to rights to acquire shares of common stock under our 2006 Stock Purchase Plan totaled $13 million. We expect to recognize those costs over a period of approximately two months.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef