Stockholders' Equity, Comprehensive Income and Share-Based Compensation

3 Months Ended

Jan. 28, 2024

Equity [Abstract]

Stockholders' Equity, Comprehensive Income and Share-Based Compensation

Stockholders’ Equity, Comprehensive Income and Share-Based Compensation

Accumulated Other Comprehensive Income (Loss)

Changes in the components of accumulated other comprehensive income (loss) (AOCI), net of tax, were as follows:

 

	Unrealized Gain (Loss) on Investments, Net		Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges		Defined and Postretirement Benefit Plans		Cumulative Translation Adjustments		Total
	(in millions)
Balance as of October 29, 2023	$	(50)	$	(118)	$	(62)	$	13	$	(217)
Other comprehensive income (loss) before reclassifications	20		31				—		51
Amounts reclassified out of AOCI	7		2		(9)		—		—
Other comprehensive income (loss), net of tax	27		33		(9)		—		51
Balance as of January 28, 2024	$	(23)	$	(85)	$	(71)	$	13	$	(166)

	Unrealized Gain (Loss) on Investments, Net		Unrealized Gain (Loss) on Derivative Instruments Qualifying as Cash Flow Hedges		Defined and Postretirement Benefit Plans		Cumulative Translation Adjustments		Total
	(in millions)
Balance as of October 30, 2022	$	(75)	$	(52)	$	(88)	$	13	$	(202)
Other comprehensive income (loss) before reclassifications	17		(38)		—		—		(21)
Amounts reclassified out of AOCI	6		(18)		—		—		(12)
Other comprehensive income (loss), net of tax	23		(56)		—		—		(33)
Balance as of January 29, 2023	$	(52)	$	(108)	$	(88)	$	13	$	(235)

The tax effects on net income of amounts reclassified from AOCI for the three months ended January 28, 2024 and January 29, 2023 were not material.

Stock Repurchase Program

In March 2023, our Board of Directors approved a common stock repurchase program authorizing $10.0 billion in repurchases, which supplemented the previously existing $6.0 billion authorization approved in March 2022. As of January 28, 2024, approximately $12.0 billion remained available for future stock repurchases under the repurchase program.

The following table summarizes our stock repurchases, including and excluding excise tax, for the three months ended January 28, 2024 and January 29, 2023:

	Three Months Ended
	January 28, 2024		January 29, 2023
	(in millions, except per share amount)
Shares of common stock repurchased	5		2
Cost of stock repurchased (including excise tax)*	$	703	$	250
Average price paid per share (including excise tax)*	$	153.20	$	103.37
Cost of stock repurchased (excluding excise tax)	$	700	$	250
Average price paid per share (excluding excise tax)	$	152.60	$	103.37

(*) Stock repurchase amounts include the 1% surcharge on stock repurchases under the Inflation Reduction Act’s excise tax. This excise tax is recorded in equity and reduces the amount available under the repurchase program, as applicable.

We record treasury stock purchases under the cost method using the first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid in capital. If we reissue treasury stock at an amount below our acquisition cost and additional paid in capital associated with prior treasury stock transactions is insufficient to cover the difference between the acquisition cost and the reissue price, this difference is recorded against retained earnings.

Dividends

In December 2023, our Board of Directors declared a quarterly cash dividend payable in March 2024, in the amount of $0.32 per share. Dividends paid during the three months ended January 28, 2024 and January 29, 2023 totaled $266 million and $220 million, respectively. We currently anticipate that cash dividends will continue to be paid on a quarterly basis, although the declaration of any future cash dividend is at the discretion of the Board of Directors and will depend on our financial condition, results of operations, capital requirements, business conditions and other factors, as well as a determination by the Board of Directors that cash dividends are in the best interests of our stockholders.

Share-Based Compensation

We have a stockholder-approved equity plan, the Employee Stock Incentive Plan (ESIP), which permits grants to employees of share-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, performance share units and performance units. In addition, the plan provides for the automatic grant of restricted stock units to non-employee directors and permits the grant of share-based awards to non-employee directors and consultants. Share-based awards made under the plan may be subject to accelerated vesting under certain circumstances in the event of a change in control. In addition, we have an Omnibus Employees’ Stock Purchase Plan (ESPP), which enables eligible employees to purchase our common stock.

During the three months ended January 28, 2024 and January 29, 2023, we recognized share-based compensation expense related to equity awards and ESPP shares. The effect of share-based compensation on the results of operations was as follows: 

	Three Months Ended
	January 28, 2024		January 29, 2023
	(In millions)
Cost of products sold	$	32	$	54
Research, development and engineering	56		54
Marketing and selling	18		17
General and administrative	64		23
Total share-based compensation	$	170	$	148

The cost associated with share-based awards is typically recognized over the awards’ service period for the entire award on a straight-line basis, adjusting for estimated forfeitures. However, in the case of share-based awards granted to certain members of senior management that allow for partial accelerated vesting in the event of a qualifying retirement based on age and years of service, the compensation expense is recognized once the individual meets the conditions for a qualifying retirement. We calculate estimated forfeiture rate on an annual basis, based on historical forfeiture activities. The cost associated with performance-based equity awards, which include performance and/or market goals, is recognized for each tranche over the service period. The cost of the portion of performance-based equity awards subject to performance goals is recognized based on an assessment of the likelihood that the applicable performance goals will be achieved, and the cost of the portion of performance-based equity awards subject to market goals is recognized based on the assumption of 100% achievement of the goal.

As of January 28, 2024, we had $1.2 billion in total unrecognized compensation expense, net of estimated forfeitures, related to grants of share-based awards under the ESIP and shares issued under the ESPP, which will be recognized over a weighted average period of 3.0 years. As of January 28, 2024, there were 21 million shares available for grant of share-based awards under the ESIP, and an additional 12 million shares available for issuance under the ESPP.

Restricted Stock Units, Restricted Stock, Performance Share Units and Performance Units

A summary of the changes in restricted stock units, restricted stock, performance share units and performance units outstanding under our equity compensation plans during the three months ended January 28, 2024 is presented below:

	Shares	Weighted Average Grant Date Fair Value
	(In millions, except per share amounts)
Outstanding as of October 29, 2023	12	$	106.24
Granted	4	$	145.08
Vested	(4)	$	96.16
Canceled	—	$	113.36
Outstanding as of January 28, 2024	12	$	123.53

As of January 28, 2024, 0.8 million additional performance-based awards could be earned based upon achievement of certain levels of specified performance and/or market goals.

During the first quarter of fiscal 2024, certain members of senior management were granted awards that are subject to the achievement of targeted levels of adjusted operating margin and targeted levels of total shareholder return (TSR) relative to the TSR of the companies in the Standard & Poor's 500 Index. Each of these two metrics will be weighted 50% and will be measured over a three-year period.

The number of shares that may vest in full after three years ranges from 0% to 200% of the target amount. The awards become eligible to vest only if the goals are achieved and will vest only if the grantee remains employed by us through each applicable vesting date, subject to a qualifying retirement based on age and years of service. The awards provide for a partial vesting based on actual performance at the conclusion of the three-year performance period in the event of a qualifying retirement.

The fair value of the portion of the awards subject to targeted levels of relative TSR is estimated on the date of grant using a Monte Carlo simulation model. Compensation expense is recognized based upon the assumption of 100% achievement of the TSR goal and will not be reversed even if the threshold level of TSR is never achieved, and is reflected over the service period and reduced for estimated forfeitures.

The fair value of the portion of the awards subject to targeted levels of adjusted operating margin is estimated on the date of grant. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized and any previously recognized compensation expense is reversed. The expected cost is based on the portion of the awards that is probable to vest and is reflected over the service period and reduced for estimated forfeitures.

Employee Stock Purchase Plans

Under the ESPP, substantially all employees may purchase our common stock through payroll deductions at a price equal to 85 percent of the lower of the fair market value of our common stock at the beginning or end of each 6-month purchase period, subject to certain limits. Our purchasing cycles begin in March and September of each of fiscal year. There were no purchases under our ESPP during either of the three months ended January 28, 2024 and January 29, 2023. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.