Annual report pursuant to Section 13 and 15(d)

Employee Equity Incentive Plans

v3.21.4
Employee Equity Incentive Plans
 12 Months Ended
Dec. 25, 2021
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [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, 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 25, 2021, 128 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. PSUs are granted to a group of senior officers and employees. For PSUs granted in 2021, 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 25, 2021, 15 million PSUs were outstanding. PSUs vest three years from the grant date. Other RSU awards and option awards generally vest over four years from the grant date. Stock options generally expire 10 years from the date of grant.
Share-Based Compensation
Share-based compensation recognized in 2021 was $2.0 billion ($1.9 billion in 2020 and $1.7 billion in 2019). During 2021, the tax benefit that we realized for the tax deduction from share-based awards totaled $377 million ($380 million in 2020 and $359 million in 2019).
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 as of the date of grant using historical volatility. 
Restricted Stock Units
Weighted average assumptions used in estimating grant values were as follows:
Dec 25, 2021 Dec 26, 2020 Dec 28, 2019
Estimated values $ 50.82  $ 54.82  $ 48.06 
Risk-free interest rate 0.2  % 0.4  % 2.3  %
Dividend yield 2.6  % 2.3  % 2.5  %
Volatility 37  % 30  % 25  %
Summary of activities:
Number of
Stock Units
(In Millions)
 Weighted Average Grant-Date Fair Value
December 26, 2020 82.7  $ 50.14 
Granted 76.8  $ 50.82 
Vested (30.2) $ 47.64 
Forfeited (11.3) $ 49.48 
December 25, 2021 118.0  $ 51.29 
Expected to vest 105.9  $ 51.47 
The aggregate fair value of awards that vested in 2021 was $1.7 billion ($1.9 billion in 2020 and $1.9 billion in 2019), 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 2021 was $1.4 billion ($1.3 billion in 2020 and $1.3 billion in 2019). 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 25, 2021, unrecognized compensation costs related to RSUs granted under our equity incentive plans were $3.8 billion. We expect to recognize those costs over a weighted average period of 1.5 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 25, 2021, 227 million shares of common stock remained available for issuance.
Employees purchased 22 million shares of common stock in 2021 for $925 million under the 2006 ESPP (21 million shares of common stock for $876 million in 2020 and 17 million shares of common stock for $688 million in 2019). As of December 25, 2021, unrecognized share-based compensation costs related to rights to acquire shares of common stock under the 2006 ESPP totaled $48 million. We expect to recognize those costs over a period of approximately two months.