Equity Plans

12 Months Ended

Sep. 03, 2020

Share-based Payment Arrangement [Abstract]

As of September 3, 2020, 90 million shares of our common stock were available for future awards under our equity plans, including 26 million shares approved for issuance under our employee stock purchase plan (“ESPP”).

Restricted Stock and Restricted Stock Units (“Restricted Stock Awards”)

As of September 3, 2020, there were 17 million shares of Restricted Stock Awards outstanding, 15 million of which contained only service conditions. For service-based Restricted Stock Awards, restrictions generally lapse in one-fourth or one-third increments during each year of employment after the grant date. Restrictions lapse on Restricted Stock granted in 2020 with performance or market conditions over a three-year period if conditions are met. At the end of the performance period, the number of actual shares to be awarded will vary between 0% and 200% of target amounts, depending upon the achievement level. Restricted Stock Awards activity for 2020 is summarized as follows:


	Number of Shares	Weighted-Average Grant Date Fair Value Per Share

Outstanding as of August 29, 2019	16	$	34.72
Granted	8	46.44
Restrictions lapsed	(6)	29.34
Canceled	(1)	40.59
Outstanding as of September 3, 2020	17	42.13


For the year ended	2020		2019		2018

Restricted stock award shares granted	8		9		4
Weighted-average grant-date fair value per share	$	46.44	$	41.11	$	42.48
Aggregate vesting-date fair value of shares vested	$	294	$	248	$	259

Employee Stock Purchase Plan

Our ESPP was offered to substantially all employees beginning in August 2018 and permits eligible employees to purchase shares of our common stock through payroll deductions of up to 10% of their eligible compensation, subject to certain limitations. The purchase price of the shares under the ESPP equals 85% of the lower of the fair market value of our common stock on either the first or last day of each six-month offering period. Compensation expense is calculated as of the beginning of the offering period as the fair value of the employees’ purchase rights utilizing the Black-Scholes option valuation model and is recognized over the offering period. Grant-date fair value and assumptions used in the Black-Scholes option valuation model were as follows:


For the year ended	2020					2019				2018

Weighted-average grant-date fair value per share	$	14.24		$	11.60			$	14.55
Average expected life in years	0.5			0.5				0.5
Weighted-average expected volatility	45.0		%	45.0			%	43.0			%
Weighted-average risk-free interest rate	0.8		%	2.2			%	2.2			%
Expected dividend yield	0.0		%	0.0			%	0.0			%

Under the ESPP, employees purchased 3 million shares of common stock for $118 million in 2020 and 3 million shares for $95 million in 2019.

Stock Options

As of September 3, 2020, there were 7 million stock options outstanding, which are generally exercisable in increments of either one-fourth or one-third per year beginning one year from the date of grant. Stock options expire 8 years from the date of grant. In 2020, we did not grant any stock options and 5 million stock options were exercised. The total intrinsic value for options exercised was $130 million, $108 million, and $446 million in 2020, 2019, and 2018, respectively.

Stock options granted and assumptions used in the Black-Scholes option valuation model were as follows:


For the year ended		2019				2018

Stock options granted		—				2
Weighted-average grant-date fair value per share		$	19.50			$	18.65
Average expected life in years		5.4				5.5
Weighted-average expected volatility	44.0			%	44.0			%
Weighted-average risk-free interest rate	2.9			%	2.2			%
Expected dividend yield	0.0			%	0.0			%

Stock price volatility was based on an average of historical volatility and the implied volatility derived from traded options on our stock. The expected lives of options granted were based, in part, on historical experience and on the terms and conditions of the options. The risk-free interest rates utilized were based on the U.S. Treasury yield in effect at each grant date.

Stock-based Compensation Expense


For the year ended	2020		2019		2018

Stock-based compensation expense by caption
Cost of goods sold	$	139	$	102	$	83
Selling, general, and administrative	103		73		61
Research and development	86		68		54
	$	328	$	243	$	198

Stock-based compensation expense by type of award
Restricted stock awards	$	272	$	178	$	140
ESPP	39		32		3
Stock options	17		33		55
	$	328	$	243	$	198

Income tax benefits related to the tax deductions for share-based awards are recognized only upon the settlement of the related share-based awards. Income tax benefits for share-based awards were $72 million, $66 million and $158 million for 2020, 2019 and 2018, respectively. Stock-based compensation expense of $42 million and $30 million was capitalized and remained in inventory as of September 3, 2020 and August 29, 2019, respectively. As of September 3, 2020, $512 million of total unrecognized compensation costs for unvested awards, before the effect of any future forfeitures, was expected to be recognized through the fourth quarter of 2024, resulting in a weighted-average period of 1.2 years.