Employee Equity Incentive Plans
|12 Months Ended|
Dec. 29, 2018
|Employee Benefits and Share-based Compensation, Noncash [Abstract]|
|Employee Equity Incentive Plans [Text Block]||
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 (2006 Plan) and our 2006 Employee Stock Purchase Plan (2006 ESPP).
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 29, 2018, 185 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, which we call outperformance stock units (OSUs), and have been granted to a group of senior officers, employees, and non-employee directors. For OSUs granted in 2018, 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 29, 2018, 11 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 2018 was $1.5 billion ($1.4 billion in 2017 and $1.4 billion in 2016). During 2018, the tax benefit that we realized for the tax deduction from share-based awards totaled $399 million ($520 million in 2017 and $616 million in 2016).
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 base expected volatility for OSUs on historical volatility.
We based the weighted average estimated value of RSU and OSU grants on the weighted average assumptions for each period as follows:
RESTRICTED STOCK UNIT AWARDS
RSU activity in 2018 was as follows:
The aggregate fair value of awards that vested in 2018 was $2.0 billion ($1.6 billion in 2017 and $1.6 billion in 2016), 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 2018 was $1.2 billion ($1.1 billion in 2017 and $1.3 billion in 2016). 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 29, 2018, unrecognized compensation costs related to RSUs granted under our equity incentive plans were $2.1 billion. We expect to recognize those costs over a weighted average period of 1.3 years.
STOCK PURCHASE PLAN
The 2006 ESPP 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 ESPP, 373 million shares of common stock are authorized for issuance through August 2021. As of December 29, 2018, 137 million shares of common stock remained available for issuance.
Employees purchased 13.7 million shares of common stock in 2018 for $468 million under the 2006 ESPP (14.5 million shares of common stock for $432 million in 2017 and 16.5 million shares of common stock for $415 million in 2016). As of December 29, 2018, unrecognized share-based compensation costs related to rights to acquire shares of common stock under the 2006 ESPP totaled $20 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://fasb.org/us-gaap/role/ref/legacyRef