Stockholders’ Equity

9 Months Ended

Sep. 27, 2020


5. STOCKHOLDERS’ EQUITY

As of September 27, 2020, approximately 4.1 million shares remained available for future grants under the 2015 Stock Plan.

Restricted Stock

Restricted stock activity was as follows:


	Restricted Stock Units (RSU)	Performance Stock Units (PSU)(1)	Weighted-Average Grant Date Fair Value per Share
Units in thousands			RSU		PSU
Outstanding at December 29, 2019	1,700	271	$	271.49	$	258.66
Awarded	234	(82)	$	301.83	$	343.38
Vested	(83)	—	$	219.18	—
Cancelled	(167)	(71)	$	267.36	$	261.19
Outstanding at September 27, 2020	1,684	118	$	278.68	400.74

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(1)The number of units reflect the estimated number of shares to be issued at the end of the performance period. Awarded units are presented net of performance adjustments.

Stock Options

Stock option activity was as follows:


	Options (in thousands)	Weighted-Average Exercise Price
Outstanding at December 29, 2019	58	$	56.65

Exercised	(48)	$	56.16

Outstanding and exercisable at September 27, 2020	10	$	59.11

ESPP

The price at which common stock is purchased under the Employee Stock Purchase Plan (ESPP) is equal to 85% of the fair market value of the common stock on the first day of the offering period or purchase date, whichever is lower. During YTD 2020, approximately 0.2 million shares were issued under the ESPP. As of September 27, 2020, there were approximately 13.3 million shares available for issuance under the ESPP.

Share Repurchases

On February 5, 2020, our Board of Directors authorized a new share repurchase program, which supersedes all prior and available repurchase authorizations, to repurchase $750 million of outstanding common stock. The repurchases may be completed under a 10b5-1 plan or at management’s discretion. During YTD 2020, we repurchased 1.4 million shares for approximately $455 million. Authorizations to repurchase approximately $295 million of our common stock remained available as of September 27, 2020.

Share-based Compensation

Share-based compensation expense reported in our condensed consolidated statements of income was as follows:



In millions	Q3 2020		Q3 2019		YTD 2020		YTD 2019
Cost of product revenue	$	6	$	5	$	13	$	15
Cost of service and other revenue	1		1		3		3
Research and development	21		15		48		50
Selling, general and administrative	33		24		52		77
Share-based compensation expense before taxes	61		45		116		145
Related income tax benefits	(12)		(10)		(27)		(31)
Share-based compensation expense, net of taxes	$	49	$	35	$	89	$	114

On August 5, 2020, we modified the performance period for our performance stock units granted in 2018, which vest at the end of the three-year period in Q4 2020. This modification affected 49 employees and is expected to result in total incremental share-based compensation cost of approximately $47 million in FY 2020, of which $17 million was expensed in Q3 2020.

The assumptions used for the specified reporting periods and the resulting estimates of weighted-average fair value per share for stock purchased under the ESPP during YTD 2020 were as follows:


	Employee Stock Purchase Rights
Risk-free interest rate	0.11% - 2.04%
Expected volatility	30% - 45%
Expected term	0.5 - 1.0 year
Expected dividends	0		%
Weighted-average grant-date fair value per share	$	75.57

As of September 27, 2020, approximately $367 million of total unrecognized compensation cost related to restricted stock and ESPP shares issued to date was expected to be recognized over a weighted-average period of approximately 2.0 years.