Annual report pursuant to Section 13 and 15(d)

Employee Equity Incentive Plans

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Employee Equity Incentive Plans
12 Months Ended
Dec. 28, 2024
Share-Based Payment Arrangement [Abstract]  
Employee Equity Incentive Plans [Text Block]
Note 18 : 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 Plan and our 2006 ESPP.
Under the 2006 Plan, 1.1 billion shares of common stock have been authorized for issuance as equity awards to employees and non-employee directors through June 2026. As of December 28, 2024, 171 million shares of common stock remained available for future grants.
Under the 2006 Plan, we may grant RSUs and stock options. We grant RSUs with a service condition as well as RSUs with a market condition, performance condition, and a service condition, which we call PSUs. PSUs are granted to a group of senior officers and employees. For PSUs granted in 2024 and 2023, the number of shares of our common stock to be received at vesting at the end of the three-year performance period will range from 0% to 200% of the target grant amount. The PSU payout will be determined based on our performance (i) relative to annual targets for each year in the performance period with respect to a revenue growth metric, weighted 60%, and a cash flow from operations metric, weighted 40%, which results are then averaged at the end of the three-year performance period; and (ii) as may be adjusted by two equally weighted modifiers: the TSR of our common stock measured against the benchmark TSR of above median of the S&P 500 Index over a three-year period and revenue CAGR for the three-year performance period. TSR is a measure of stock price appreciation plus any dividends paid in this performance period. For 2024 PSUs, overall payout will be capped at the target grant amount if our absolute TSR is negative; additionally, the combined modifiers applied to the payout are capped at +/-25%. As of December 28, 2024, 10 million PSUs were outstanding. PSUs vest three years and one month following the start of the performance period. Other RSU awards and option awards generally vest over four years from the grant date.
Share-Based Compensation
Share-based compensation recognized in 2024 was $3.4 billion ($3.2 billion in 2023 and $3.1 billion in 2022). During 2024, the actual tax benefit that we realized for the tax deduction from share-based awards totaled $684 million ($571 million in 2023 and $478 million in 2022). We realized a related tax expense of $139 million in 2024 for the share-based awards as a result of the shortfall between the tax deduction being less than the associated deferred tax asset for the awards.
We estimate the fair value of RSUs and PSUs with a service condition or performance 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 PSUs with a market condition using a Monte Carlo simulation model as of the date of grant using historical volatility. 
Restricted Stock Units and Performance Stock Units
Weighted average assumptions used in estimating grant values were as follows:
Years Ended
Dec 28, 2024 Dec 30, 2023 Dec 31, 2022
Estimated values $ 39.51  $ 28.92  $ 41.12 
Risk-free interest rate 4.7  % 4.7  % 2.2  %
Dividend yield 1.2  % 1.6  % 3.4  %
Volatility 36  % 36  % 40  %
Summary of activities:
Number of Stock Units Outstanding (In Millions)
Weighted Average Grant-Date Fair Value
Balance as of December 30, 2023 172.9  $ 37.05 
Granted 64.5  39.51 
Vested (83.8) 40.33 
Forfeited (36.2) 35.54 
Balance as of December 28, 2024 117.4  $ 36.52 
Expected to vest 104.3  $ 36.70 
The aggregate fair value of awards that vested in 2024 was $2.4 billion ($2.2 billion in 2023 and $2.0 billion in 2022), 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 2024 was $3.4 billion ($2.7 billion in 2023 and $2.5 billion in 2022). 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 28, 2024, unrecognized compensation costs related to RSUs granted under our equity incentive plans were $2.7 billion. We expect to recognize those costs over a weighted average period of 1.1 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, 523 million shares of common stock are authorized for issuance through August 2026. As of December 28, 2024, 118 million shares of common stock remained available for issuance.
Employees purchased 39 million shares of common stock in 2024 for $972 million under the 2006 ESPP (43 million shares of common stock for $1.0 billion in 2023 and 27 million shares of common stock for $931 million in 2022). As of December 28, 2024, unrecognized share-based compensation costs related to rights to acquire shares of common stock under the 2006 ESPP totaled $63 million. We expect to recognize those costs over a period of approximately two months.