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Stockholders’ Equity | 3 Months Ended
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Apr. 03, 2022
Equity [Abstract] |
Stockholders’ Equity |
5. STOCKHOLDERS’ EQUITY
As of April 3, 2022, approximately 1.9 million shares remained available for future grants under the 2015 Stock and Incentive Compensation 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 January 2, 2022 | 1,130 |  |  | 328 |  |  | $ | 345.66 |  |  | $ | 466.42 |
Awarded | 996 |  |  | 194 |  |  | $ | 330.98 |  |  | $ | 329.57 |
Vested | (32) |  |  | — |  |  | $ | 442.14 |  |  | $ | — |
Cancelled | (51) |  |  | (7) |  |  | $ | 353.04 |  |  | $ | 446.38 |
Outstanding at April 3, 2022 | 2,043 |  |  | 515 |  |  | $ | 336.77 |  |  | $ | 415.16 |
_____________ (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:
Units in thousands | Options |  | Weighted-Average Exercise Price |  | Performance Stock Options(1) |  | Weighted-Average Exercise Price
Outstanding at January 2, 2022 | 8 |  |  | $ | 66.42 |  |  | 17 |  |  | $ | 85.54 |
Granted | 180 |  |  | $ | 330.25 |  |  | — |  |  | $ | — |
Outstanding at April 3, 2022 | 188 |  |  | $ | 318.73 |  |  | 17 |  |  | $ | 85.54 |
Exercisable at April 3, 2022 | 8 |  |  | $ | 66.42 |  |  | — |  |  | $ | — |
_____________ (1)The number of units reflect awards that have been granted and for which it is assumed to be probable that the underlying performance goals will be achieved. Liability-Classified Awards We grant cash-based equity incentive awards to GRAIL employees. The cash to be awarded may subsequently increase or decrease in direct correlation to changes in the enterprise fair value of GRAIL, as defined under the Cash-Based Equity Appreciation Award Plan. Cash-based equity incentive award activity was as follows:
In millions |
Outstanding at January 2, 2022 | $ | 184 |
Granted | 70 |
Cancelled | (13) |
Outstanding at April 3, 2022 | $ | 241 |
Estimated liability as of April 3, 2022 (included in accrued liabilities) | $ | 24 |
We recognized share-based compensation expense of $13 million in Q1 2022. As of April 3, 2022, approximately $217 million of total unrecognized compensation cost related to awards issued to date was expected to be recognized over a weighted-average period of approximately 3.6 years. In connection with the acquisition of GRAIL, we assumed a performance-based award for which vesting is based on GRAIL’s future revenues. The award has an aggregate potential value of up to $78 million and expires, to the extent unvested, in August 2030. As of April 3, 2022, it was not probable that the performance conditions associated with the award will be achieved and, therefore, no share-based compensation expense, or corresponding liability, has been recognized in the condensed consolidated financial statements to-date. Employee Stock Purchase Plan 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 Q1 2022, approximately 0.1 million shares were issued under the ESPP. As of April 3, 2022, there were approximately 13.0 million shares available for issuance under the ESPP. Share Repurchases We did not repurchase any shares during Q1 2022. As of April 3, 2022, authorizations to repurchase approximately $15 million of our common stock remained available under the $750 million share repurchase program authorized by our Board of Directors on February 5, 2020. The repurchases may be completed under a 10b5-1 plan or at management’s discretion. Share-Based Compensation Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our condensed consolidated statements of income was as follows:
In millions | Q1 2022 |  | Q1 2021 |  |  |  |
Cost of product revenue | $ | 6 |  |  | $ | 7 |  |  |  |  |
Cost of service and other revenue | 1 |  |  | 1 |  |  |  |  |
Research and development | 36 |  |  | 24 |  |  |  |  |
Selling, general and administrative | 49 |  |  | 35 |  |  |  |  |
Share-based compensation expense before taxes | 92 |  |  | 67 |  |  |  |  |
Related income tax benefits | (21) |  |  | (13) |  |  |  |  |
Share-based compensation expense, net of taxes | $ | 71 |  |  | $ | 54 |  |  |  |  |
In February 2021, we modified the metrics and reduced the maximum potential payouts for our performance stock units granted in 2019 and 2020. The PSU granted in 2019 vested on January 2, 2022 and the PSU granted in 2020 vests at the end of the three-year period ending on January 1, 2023. The modifications affected 52 employees with units granted in 2019, which resulted in total incremental share-based compensation expense of approximately $41 million, and 72 employees with units granted in 2020, which resulted in total incremental share-based compensation expense of approximately $65 million. The assumptions used and the resulting estimate of weighted-average fair value per share for stock purchased under the ESPP during Q1 2022 were as follows:
| Employee Stock Purchase Rights |  |
Risk-free interest rate | 0.06% - 0.78% |  |
Expected volatility | 37% - 47% |  |
Expected term | 0.5 - 1.0 year |  |
Expected dividends | 0 | % |  |
Weighted-average grant-date fair value per share | $ | 91.27 |  |  |
As of April 3, 2022, approximately $782 million of total unrecognized compensation cost related to restricted stock, stock options and ESPP shares issued to date was expected to be recognized over a weighted-average period of approximately 2.6 years.

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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