Stock Repurchase Program

9 Months Ended

Sep. 03, 2021

Share Repurchase Program [Abstract]

SHARE REPURCHASE PROGRAM

STOCK REPURCHASE PROGRAM

To facilitate our stock repurchase program, designed to return value to our stockholders and minimize dilution from stock issuances, we may repurchase shares in the open market or enter into structured repurchase agreements with third parties. In May 2018, our Board of Directors granted authority to repurchase up to $8 billion in common stock, which we fully utilized during the nine months ended September 3, 2021. In December 2020, our Board of Directors granted additional authority to repurchase up to $15 billion in common stock through the end of fiscal 2024.

During the nine months ended September 3, 2021 and August 28, 2020, we entered into several structured stock repurchase agreements with large financial institutions, whereupon we provided them with prepayments totaling $2.95 billion and $2.2 billion, respectively. We enter into these agreements in order to take advantage of repurchasing shares at a guaranteed discount to the Volume Weighted Average Price (“VWAP”) of our common stock over a specified period of time. We only enter into such transactions when the discount that we receive is higher than the foregone return on our cash prepayments to the financial institutions. There were no explicit commissions or fees on these structured repurchases. Under the terms of the agreements, there is no requirement for the financial institutions to return any portion of the prepayment to us.

The financial institutions agree to deliver shares to us at monthly intervals during the contract term. The parameters used to calculate the number of shares deliverable are: the total notional amount of the contract, the number of trading days in the contract, the number of trading days in the interval and the average VWAP of our stock during the interval less the agreed upon discount.

During the nine months ended September 3, 2021, we repurchased approximately 5.6 million shares at an average price of $508.52 through structured repurchase agreements entered into during fiscal 2020 and the nine months ended September 3, 2021. During the nine months ended August 28, 2020 we repurchased approximately 6.5 million shares at an average price of $350.72 through structured repurchase agreements entered into during fiscal 2019 and the nine months ended August 28, 2020.

For the nine months ended September 3, 2021, the prepayments were classified as treasury stock on our condensed consolidated balance sheets at the payment date, though only shares physically delivered to us by September 3, 2021 were excluded from the computation of net income per share. As of September 3, 2021, $334 million of prepayment remained under our outstanding structured stock repurchase agreement.

Subsequent to September 3, 2021, as part of the December 2020 stock repurchase authority, we entered into a structured stock repurchase agreement with a large financial institution whereupon we provided them with a prepayment of $1 billion. Upon completion of the $1 billion stock repurchase agreement, $13.1 billion remains under our December 2020 authority.