Annual report pursuant to Section 13 and 15(d)

Employee Equity Incentive Plans

v3.19.3.a.u2
Employee Equity Incentive Plans
 12 Months Ended
Dec. 28, 2019
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract]  
Employee Equity Incentive Plans [Text Block]
NOTE 19 :
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, 866 million shares of common stock have been authorized for issuance as equity awards to employees and non-employee directors through June 2023. As of December 28, 2019, 228 million shares of common stock remained available for future grants.









Under the 2006 Plan, we 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. Prior to granting PSUs, we granted OSUs, which were RSUs with only market and service conditions. PSUs are granted to a group of senior officers and employees. For PSUs granted in 2019, the number of shares of our common stock to be received at vesting will range from 0% to 200% of the target grant amount, equally based on two metrics: our three-year cumulative non-GAAP EPS growth relative to a target rate and 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 28, 2019, 13 million PSUs and OSUs were outstanding. The PSUs granted in 2019 vest three years from the grant date, and OSUs, which were granted prior to 2019, generally vest three years and one month from the grant date. Other RSU awards and option awards generally vest over four years from the grant date. Stock options generally expire ten years from the date of grant.
SHARE-BASED COMPENSATION
Share-based compensation recognized in 2019 was $1.7 billion ($1.5 billion in 2018 and $1.4 billion in 2017). During 2019, the tax benefit that we realized for the tax deduction from share-based awards totaled $359 million ($399 million in 2018 and $520 million in 2017).
We estimate the fair value of RSUs 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 RSUs with a market condition using a Monte Carlo simulation model on the date of grant using historical volatility. 
RESTRICTED STOCK UNITS
Weighted average assumptions used in estimating grant values were as follows:
 
 
Dec 28,
2019
 
Dec 29,
2018
 
Dec 30,
2017
Estimated values
 
$
48.06

 
$
48.95

 
$
35.30

Risk-free interest rate
 
2.3
%
 
2.4
%
 
1.4
%
Dividend yield
 
2.5
%
 
2.4
%
 
2.9
%
Volatility
 
25
%
 
22
%
 
23
%

Summary of activities:
 
 
Number of
Stock Units
(In Millions)
 
Weighted
Average
Grant-Date
Fair Value
December 29, 2018
 
89.9

 
$
39.07

Granted
 
37.6

 
$
48.06

Vested
 
(35.2
)
 
$
36.51

Forfeited
 
(8.2
)
 
$
42.20

December 28, 2019
 
84.1

 
$
43.86

Expected to vest
79.8

 
$
43.72


The aggregate fair value of awards that vested in 2019 was $1.9 billion ($2.0 billion in 2018 and $1.6 billion in 2017), 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 2019 was $1.3 billion ($1.2 billion in 2018 and $1.1 billion in 2017). 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, 2019, 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 28, 2019, 119 million shares of common stock remained available for issuance.
Employees purchased 17.1 million shares of common stock in 2019 for $688 million under the 2006 ESPP (13.7 million shares of common stock for $468 million in 2018 and 14.5 million shares of common stock for $432 million in 2017). As of December 28, 2019, unrecognized share-based compensation costs related to rights to acquire shares of common stock under the 2006 ESPP totaled $42 million. We expect to recognize those costs over a period of approximately two months.