Quarterly report pursuant to Section 13 or 15(d)

Employee Equity Incentive Plans

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Employee Equity Incentive Plans
9 Months Ended
Oct. 01, 2011
Employee Equity Incentive Plans [Abstract]  
Employee Equity Incentive Plans [Text Block]

Note 22: 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.

 

In connection with our completed acquisition of McAfee, we assumed their equity incentive plans and issued replacement awards in the first quarter of 2011. The stock options and restricted stock units issued generally retain the terms and conditions of the respective plans under which they were originally granted. We will not grant additional shares under these plans.

 

In May 2011, stockholders approved an extension of the 2006 Equity Incentive Plan (2006 Plan). Stockholders approved 168 million additional shares for issuance, increasing the total shares of common stock available for issuance as equity awards to employees and non-employee directors to 596 million shares. The approval also extended the expiration date of the 2006 Plan to June 2014. The maximum shares to be awarded as non-vested shares (restricted stock) or non-vested share units (restricted stock units) was increased to 394 million shares. As of October 1, 2011, 308 million shares remained available for future grant under the 2006 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. Rights to purchase shares are granted during the first and third quarters of each year. In May 2011, stockholders approved an extension of the 2006 Stock Purchase Plan. Stockholders approved 133 million additional shares for issuance, increasing the total shares of common stock available for issuance to 373 million shares. The approval also extended the expiration date of the 2006 Stock Purchase Plan to August 2016. As of October 1, 2011, 254 million shares were available for issuance under the 2006 Stock Purchase Plan.

 

Share-Based Compensation

 

We recognized $250 million of share-based compensation in the third quarter of 2011 and $812 million for the first nine months of 2011 ($224 million in the third quarter of 2010 and $704 million for the first nine months of 2010).

 

We estimate the fair value of restricted stock unit awards with time-based vesting 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 common stock prior to vesting. We estimate the fair value of market-based restricted stock units using a Monte Carlo simulation model on the date of grant. We based the weighted average estimated values of restricted stock unit grants, as well as the weighted average assumptions that we used in calculating the fair value, on estimates at the date of grant, as follows:

  Three Months Ended     Nine Months Ended  
  Oct. 1,     Sept. 25,     Oct. 1,     Sept. 25,  
  2011     2010     2011     2010  
Estimated values $ 21.37     $ 20.58     $ 19.80     $ 22.64  
Risk-free interest rate   0.5 %     0.6 %     0.7 %     1.1 %
Dividend yield   3.6 %     2.9 %     3.4 %     2.6 %
Volatility   26 %     33 %     27 %     31 %

We use the Black-Scholes option pricing model to estimate the fair value of options granted under our equity incentive plans and rights to acquire stock granted under our stock purchase plan. We based the weighted average estimated values of employee stock option grants and rights granted under the stock purchase plan, as well as the weighted average assumptions used in calculating these values, on estimates at the date of grant, as follows:

  Stock Options     Stock Purchase Plan  
  Three Months Ended     Nine Months Ended     Three Months Ended     Nine Months Ended  
  Oct. 1,     Sept. 25,     Oct. 1,     Sept. 25,     Oct. 1,     Sept. 25,     Oct. 1,     Sept. 25,  
  2011     2010     2011     2010     2011     2010     2011     2010  
Estimated values $ 3.82     $ 5.13     $ 3.88     $ 4.84     $ 4.90     $ 4.82     $ 4.69     $ 4.71  
Expected life (in years)   5.4       4.8       5.3       4.9       0.5       0.5       0.5       0.5  
Risk-free interest rate   1.7 %     2.5 %     2.2 %     2.6 %     0.2 %     0.3 %     0.2 %     0.2 %
Volatility   26 %     33 %     26 %     28 %     28 %     32 %     26 %     32 %
Dividend yield   3.6 %     2.9 %     3.4 %     2.7 %     3.7 %     3.0 %     3.6 %     3.1 %

Under the stock purchase plan, rights to purchase shares are only granted during the first and third quarters of each year.

 

Restricted Stock Unit Awards

 

Activity with respect to outstanding restricted stock units (RSUs) for the first nine months of 2011 was as follows:

      Weighted
      Average
  Number of   Grant-Date
(In Millions, Except Per RSU Amounts) RSUs   Fair Value
December 25, 2010 99.8   $ 18.56
Granted 41.8   $ 19.80
Assumed in acquisition 5.8   $ 20.80
Vested (34.3)   $ 18.51
Forfeited (3.7)   $ 19.03
October 1, 2011 109.4   $ 19.16

The aggregate fair value of awards that vested during the first nine months of 2011 was $679 million, which represents the market value of Intel common stock on the date that the restricted stock units vested. The grant date fair value of awards that vested during the first nine months of 2011 was $635 million. The number of restricted stock units vested includes shares that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. As of October 1, 2011, 4 million of the outstanding restricted stock units were market-based restricted stock units.

       

Stock Option Awards

 

Activity with respect to outstanding stock options for the first nine months of 2011 was as follows:

        Weighted
    Number of   Average
(In Millions, Except Per Option Amounts) Options   Exercise Price
December 25, 2010 386.4   $ 20.45
Granted 14.1   $ 21.39
Assumed in acquisition 11.8   $ 15.95
Exercised (32.3)   $ 18.85
Cancelled and forfeited (7.8)   $ 20.40
Expired (17.9)   $ 24.96
October 1, 2011 354.3   $ 20.25
           
Options exercisable as of:        
  December 25, 2010 263.0   $ 21.03
  October 1, 2011 237.3   $ 20.70

During the first nine months of 2011, the aggregate intrinsic value of stock option exercises was $120 million, which represents the difference between the exercise price and the value of Intel common stock at the time of exercise.

 

Stock Purchase Plan

 

Employees purchased 18.5 million shares in the first nine months of 2011 (17.2 million shares in the first nine months of 2010) for $318 million ($281 million in the first nine months of 2010) under the 2006 Stock Purchase Plan.