Quarterly report pursuant to Section 13 or 15(d)

Employee Equity Incentive Plans

v2.4.0.8
Employee Equity Incentive Plans
 9 Months Ended
Sep. 27, 2014
Employee Benefit And Share-Based Compensation [Abstract]  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
Note 16: 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.
Under the 2006 Equity Incentive Plan (the 2006 Plan), 719 million shares of common stock are available for issuance as equity awards to employees and non-employee directors through June 2016. A maximum of 517 million of these shares of common stock can be granted as restricted stock or restricted stock units. As of September 27, 2014, 260 million shares of common stock 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 of common stock are granted during the first and third quarters of each year. Under the 2006 Stock Purchase Plan, stockholders made 373 million shares of common stock available for issuance through August 2016. As of September 27, 2014, 197 million shares of common stock were available for issuance under the 2006 Stock Purchase Plan.
Share-Based Compensation
We recognized $281 million of share-based compensation in the third quarter of 2014 and $867 million for the first nine months of 2014 ($268 million in the third quarter of 2013 and $855 million for the first nine months of 2013).

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, for each period as follows:
 
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 27,
2014
 
Sep 28,
2013
 
Sep 27,
2014
 
Sep 28,
2013
Estimated values
 
$
32.93

 
$
21.20

 
$
25.12

 
$
21.43

Risk-free interest rate
 
0.5
%
 
0.3
%
 
0.5
%
 
0.2
%
Dividend yield
 
2.6
%
 
3.9
%
 
3.4
%
 
3.8
%
Volatility
 
23
%
 
24
%
 
23
%
 
25
%

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, for each period as follows (no options were granted during the third of quarter of 2014):
 
 
Stock Options
 
Stock Purchase Plan
 
 
Three Months Ended
 
Nine Months Ended
 
Three Months Ended
 
Nine Months Ended
 
 
Sep 27,
2014
 
Sep 28,
2013
 
Sep 27,
2014
 
Sep 28,
2013
 
Sep 27,
2014
 
Sep 28,
2013
 
Sep 27,
2014
 
Sep 28,
2013
Estimated values
 
n/a
 
$
3.25

 
$
3.61

 
$
3.11

 
$
6.99

 
$
4.74

 
$
5.87

 
$
4.52

Expected life (in years)
 
n/a
 
5.2

 
5.1

 
5.2

 
0.5

 
0.5

 
0.5

 
0.5

Risk-free interest rate
 
n/a
 
1.5
%
 
1.7
%
 
0.8
%
 
0.1
%
 
0.1
%
 
0.1
%
 
0.1
%
Dividend yield
 
n/a
 
3.9
%
 
3.6
%
 
3.9
%
 
2.6
%
 
3.9
%
 
3.2
%
 
4.0
%
Volatility
 
n/a
 
24
%
 
23
%
 
25
%
 
22
%
 
22
%
 
22
%
 
22
%

Restricted Stock Unit Awards
Information with respect to outstanding restricted stock unit (RSU) activity in the first nine months of 2014 was as follows: 
 
 
Number of
RSUs
(In Millions)
 
Weighted Average
Grant-Date
Fair Value
December 28, 2013
 
113.3

 
$
22.47

Granted
 
54.0

 
$
25.12

Vested
 
(40.8
)
 
$
22.34

Forfeited
 
(7.1
)
 
$
22.79

September 27, 2014
 
119.4

 
$
23.69


The aggregate fair value of awards that vested in the first nine months of 2014 was $1.1 billion, which represents the market value of our common stock on the date that the restricted stock units vested. The grant-date fair value of awards that vested in first nine months of 2014 was $911 million. The number of restricted stock units vested includes shares of common stock 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 September 27, 2014, 3.8 million of the outstanding restricted stock units were market-based restricted stock units.
Stock Option Awards
Information with respect to outstanding stock option activity in the first nine months of 2014 was as follows:
 
 
Number of
Options
(In Millions)
 
Weighted Average
Exercise Price
December 28, 2013
 
153.0

 
$
21.10

Granted
 
0.6

 
$
25.34

Exercised
 
(59.1
)
 
$
19.87

Cancelled and forfeited
 
(2.6
)
 
$
23.70

Expired
 
(9.8
)
 
$
27.03

September 27, 2014
 
82.1

 
$
21.23

Options exercisable as of:
 
 
 
 
December 28, 2013
 
111.5

 
$
20.25

September 27, 2014
 
58.8

 
$
20.24


During the first nine months of 2014, the aggregate intrinsic value of stock option exercises was $541 million, which represents the difference between the exercise price and the value of our common stock at the time of exercise.
Stock Purchase Plan
Employees purchased 19.4 million shares of common stock in the first nine months of 2014 for $393 million (20.5 million shares of common stock in the first nine months of 2013 for $369 million) under the 2006 Stock Purchase Plan.