Note 6. Employee Benefit Plans
Employee Savings and Retirement Plan. The Company has a 401(k) plan that allows eligible employees to contribute up to 100% of their eligible compensation, subject to annual limits. The Company matches a portion of the employee contributions and may, at its discretion, make additional contributions based upon earnings. The Company’s contribution expense was $70 million, $60 million and $52 million in fiscal 2013, 2012 and 2011, respectively.
Equity Compensation Plans. The 2006 Long-Term Incentive Plan (the 2006 Plan) was adopted during the second quarter of fiscal 2006 and replaced the 2001 Stock Option Plan and the 2001 Non-Employee Directors’ Stock Option Plan and their predecessor plans (the Prior Plans). The 2006 Plan provides for the grant of incentive and non-qualified stock options, restricted stock units, stock appreciation rights, restricted stock, performance stock units and other share-based awards and is the source of shares issued under the Non-Qualified Deferred Compensation Plan (the NQDCP), formerly known as the Executive Retirement Matching Contribution Plan. The shares authorized under the 2006 Plan were approximately 573,284,000 at September 29, 2013, including 90,000,000 shares that were approved by the Company’s stockholders in March 2013. The share reserve remaining under the 2006 Plan was approximately 270,380,000 at September 29, 2013. Shares subject to any stock option under a Prior Plan that is terminated or canceled (but not a stock option under a Prior Plan that expires) following the date that the 2006 Plan was approved by stockholders, and shares that are subject to an award under the NQDCP and are returned to the Company because they fail to vest, will again become available for grant under the 2006 Plan. The Board of Directors of the Company may amend or terminate the 2006 Plan at any time. Certain amendments, including an increase in the share reserve, require stockholder approval.
During fiscal 2011, the Company assumed a total of 9,564,000 outstanding stock awards under various stock-based incentive plans (the Assumed Plans) as a result of the acquisition of Atheros (Note 9). The Assumed Plans provided for the grant of incentive stock options, non-qualified stock options, restricted stock units and other stock-based awards. The Company can continue to grant stock awards under one of the Assumed Plans, the Atheros Communications, Inc. 2004 Stock Incentive Plan, as amended (the Atheros Plan) to certain employees. The share reserve under the Atheros Plan was 4,075,000 at September 29, 2013. All other remaining shares available under Assumed Plans were terminated on the date of the acquisition, and no additional shares may be granted under those plans.
Net share-based awards, after forfeitures and cancelations, granted during fiscal 2013, 2012 and 2011 represented 0.8%, 0.9% and 0.7% of outstanding shares as of the beginning of each fiscal year, respectively. Total share-based awards granted during fiscal 2013, 2012 and 2011 represented 1.0%, 1.0% and 0.9%, respectively, of outstanding shares as of the end of each fiscal year.
Restricted Stock Units: RSUs are share awards that entitle the holder to receive shares of the Company’s common stock upon vesting. The RSUs generally include dividend-equivalent rights and vest over periods of three years from the date of grant. A summary of RSU transactions for all equity compensation plans follows:
|
| | | | | | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value | | Aggregate Intrinsic Value |
| (In thousands) | | | | (In billions) |
RSUs outstanding at September 30, 2012 | 32,922 |
| | $ | 53.22 |
| | |
RSUs granted | 15,509 |
| | 64.20 |
| | |
RSUs canceled/forfeited | (1,549 | ) | | 56.69 |
| | |
RSUs vested | (15,804 | ) | | 50.50 |
| | |
RSUs outstanding at September 29, 2013 | 31,078 |
| | $ | 59.91 |
| | $ | 2.1 |
|
At September 29, 2013, total unrecognized estimated compensation expense related to non-vested RSUs granted prior to that date was $1.3 billion, which is expected to be recognized over a weighted-average period of 1.8 years. The total vest-date fair value of RSUs that vested during fiscal 2013, 2012 and 2011 was $1.0 billion, $352 million and $43 million, respectively. For the majority of RSUs, shares are issued on the vesting dates net of the amount of shares needed to satisfy statutory tax withholding requirements to be paid by the Company on behalf of the employees. The total shares withheld were approximately 5,805,000, 1,965,000 and 243,000 in fiscal 2013, 2012 and 2011, respectively, and were based on the value of the RSUs on their vesting dates as determined by the Company’s closing stock price. Total payments for the employees’ tax obligations to the taxing authorities were $374 million, $131 million and $14 million in fiscal 2013, 2012 and 2011, respectively.
Stock Options: The Board of Directors may grant stock options to selected employees, directors and consultants to the Company to purchase shares of the Company’s common stock at an exercise price not less than the fair market value of the stock at the date of grant. Stock options vest over periods not exceeding five years and are exercisable for up to 10 years from the grant date. A summary of stock option transactions for all equity compensation plans follows:
|
| | | | | | | | | | | | |
| Number of Shares | | Weighted- Average Exercise Price | | Average Remaining Contractual Term | | Aggregate Intrinsic Value |
| (In thousands) | | | | (Years) | | (In billions) |
Stock options outstanding at September 30, 2012 | 106,601 |
| | $ | 39.96 |
| | | | |
Stock options canceled/forfeited/expired | (652 | ) | | 40.25 |
| | | | |
Stock options exercised | (34,923 | ) | | 37.51 |
| | | | |
Stock options outstanding at September 29, 2013 | 71,026 |
| | $ | 41.17 |
| | 4.2 | | $ | 1.9 |
|
Exercisable at September 29, 2013 | 65,243 |
| | $ | 41.09 |
| | 4.0 | | $ | 1.7 |
|
At September 29, 2013, total unrecognized estimated compensation expense related to non-vested stock options granted prior to that date was $51 million, which is expected to be recognized over a weighted-average period of 0.5 years. The total intrinsic value of stock options exercised during fiscal 2013, 2012 and 2011 was $949 million, $1.0 billion and $1.1 billion, respectively. The Company recorded cash received from the exercise of stock options of $1.3 billion, $1.5 billion and $2.5 billion and related tax benefits of $659 million, $438 million and $421 million during fiscal 2013, 2012 and 2011, respectively. Upon option exercise, the Company issues new shares of stock.
Employee Stock Purchase Plan. The Company has an employee stock purchase plan for eligible employees to purchase shares of common stock at 85% of the lower of the fair market value on the first or the last day of each offering period, which is generally six months. Employees may authorize the Company to withhold up to 15% of their compensation during any offering period, subject to certain limitations. The employee stock purchase plan includes a non-423(b) plan. The shares authorized under the employee stock purchase plan were approximately 46,709,000 at September 29, 2013. The shares reserved for future issuance were approximately 10,713,000 at September 29, 2013. During fiscal 2013, 2012 and 2011, approximately 4,044,000, 3,654,000 and 3,778,000 shares, respectively, were issued under the plan at an average price of $52.70, $48.31 and $36.82 per share, respectively. At September 29, 2013, total unrecognized estimated compensation expense related to non-vested purchase rights granted prior to that date was $21 million. The Company recorded cash received from the exercise of purchase rights of $213 million, $177 million and $139 million during fiscal 2013, 2012 and 2011, respectively.
