Employee Equity Incentive Plans
|12 Months Ended|
Dec. 29, 2012
|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 May 2011, stockholders approved an extension of the 2006 Equity Incentive Plan (the 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 December 29, 2012, 247 million shares remained available for future grant under the 2006 Plan.
Going forward, we may assume the equity incentive plans and the outstanding equity awards of certain acquired companies. Once they are assumed, we do not grant additional shares under those plans. In connection with our completed acquisition of McAfee in 2011, we assumed McAfee's equity incentive plan and issued replacement awards. The stock options and restricted stock units issued generally retain similar terms and conditions of the respective plan under which they were originally granted.
We issue restricted stock units with both a market condition and a service condition (market-based restricted stock units), referred to in our 2012 Proxy Statement as outperformance stock units, to a small group of senior officers and non-employee directors. For market-based restricted stock units issued in 2012, the number of shares of Intel common stock to be received at vesting will range from 50% to 200% of the target amount, based on total stockholder return (TSR) on Intel common stock measured against the benchmark TSR of a peer group 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, 2012, 4 million market-based restricted stock units were outstanding. These market-based restricted stock units accrue dividend equivalents and generally vest three years and one month from the grant date.
Equity awards granted to employees in 2012 under our equity incentive plans generally vest over four years from the date of grant, and options expire seven years from the date of grant, with the exception of market-based restricted stock units, a small number of restricted stock units granted to executive-level employees, and replacement awards related to acquisitions.
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. 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 December 29, 2012, 237 million shares were available for issuance under the 2006 Stock Purchase Plan.
Share-based compensation recognized in 2012 was $1.1 billion ($1.1 billion in 2011 and $917 million in 2010).
On a quarterly basis, we assess changes to our estimate of expected equity award forfeitures based on our review of recent forfeiture activity and expected future employee turnover. We recognize the effect of adjustments made to the forfeiture rates, if any, in the period that we change the forfeiture estimate. The effect of forfeiture adjustments in 2012, 2011, and 2010 was not significant.
The total share-based compensation cost capitalized as part of inventory as of December 29, 2012 was $41 million ($38 million as of December 31, 2011 and $48 million as of December 25, 2010). During 2012, the tax benefit that we realized for the tax deduction from share-based awards totaled $510 million ($327 million in 2011 and $266 million in 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 value 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:
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 value of employee stock option grants and rights granted under the stock purchase plan, as well as the weighted average assumptions used in calculating the fair value, on estimates at the date of grant, as follows:
We base the expected volatility on implied volatility because we have determined that implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. Prior to 2011, we used the simplified method of calculating expected life due to significant differences in the vesting terms and contractual life of current option grants compared to our historical grants. In 2011, we began using historical option exercise data as the basis for determining expected life, as we believe that we have sufficient historical data to provide a reasonable basis upon which to estimate the expected life input for valuing options using the Black-Scholes model.
Restricted Stock Unit Awards
Information with respect to outstanding restricted stock unit (RSU) activity is as follows:
The aggregate fair value of awards that vested in 2012 was $1.2 billion ($753 million in 2011 and $808 million in 2010), 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 in 2012 was $816 million ($697 million in 2011 and $612 million in 2010). The number of restricted stock units vested includes shares that we withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements. Restricted stock units that are expected to vest are net of estimated future forfeitures.
As of December 29, 2012, there was $1.5 billion in unrecognized compensation costs related to restricted stock units granted under our equity incentive plans. We expect to recognize those costs over a weighted average period of 1.3 years.
Stock Option Awards
As of December 29, 2012, options outstanding that have vested and are expected to vest are as follows:
Aggregate intrinsic value represents the difference between the exercise price and $20.23, the closing price of Intel common stock on December 28, 2012, as reported on The NASDAQ Global Select Market*, for all in-the-money options outstanding. Options outstanding that are expected to vest are net of estimated future option forfeitures.
Options with a fair value of $205 million completed vesting during 2012 ($226 million during 2011 and $240 million during 2010). As of December 29, 2012, there was $96 million in unrecognized compensation costs related to stock options granted under our equity incentive plans. We expect to recognize those costs over a weighted average period of 1.0 years.
Additional information with respect to stock option activity is as follows:
The aggregate intrinsic value of stock option exercises in 2012 was $517 million ($318 million in 2011 and $65 million in 2010), which represents the difference between the exercise price and the value of Intel common stock at the time of exercise.
The following table summarizes information about options outstanding as of December 29, 2012:
These options will expire if they are not exercised by specific dates through April 2021. Option exercise prices for options exercised during the three-year period ended December 29, 2012 ranged from $0.33 to $28.15.
Stock Purchase Plan
Approximately 72% of our employees were participating in our stock purchase plan as of December 29, 2012 (70% in 2011 and 75% in 2010). Employees purchased 17.4 million shares in 2012 for $355 million under the 2006 Stock Purchase Plan (18.5 million shares for $318 million in 2011 and 17.2 million shares for $281 million in 2010). As of December 29, 2012, there was $13 million in unrecognized compensation costs related to rights to acquire common stock under our stock purchase plan. We expect to recognize those costs over a period of approximately one and a half 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