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STOCKHOLDERS’ EQUITY | 9 Months Ended
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Sep. 29, 2024
Equity [Abstract] |
STOCKHOLDERS’ EQUITY |
6. STOCKHOLDERS' EQUITY
As of September 29, 2024, approximately 5.4 million shares remained available for future grants under the Amended and Restated 2015 Stock and Incentive Compensation Plan (the 2015 Plan). In connection with the GRAIL Spin-Off, all unvested RSU and PSU were equitably adjusted pursuant to the plan to preserve their intrinsic value and the number of shares reserved for issuance under the 2015 Plan was increased by 160,000 shares. 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 31, 2023 | 2,198 |  |  | — |  |  | $ | 236.32 |  |  | $ | — |
Awarded | 2,753 |  |  | 647 |  |  | $ | 133.60 |  |  | $ | 159.36 |
Unvested adjustment for GRAIL Spin-Off | 107 |  |  | 12 |  |  | $ | — |  |  | $ | — |
Vested | (83) |  |  | — |  |  | $ | 258.43 |  |  | $ | — |
Cancelled | (352) |  |  | (39) |  |  | $ | 201.11 |  |  | $ | 167.68 |
Outstanding at September 29, 2024 | 4,623 |  |  | 620 |  |  | $ | 172.30 |  |  | $ | 159.72 |
_____________ (1)We issue PSU for which the number of shares issuable is based on our performance relative to specified earnings per share targets (EPS PSU) and PSU with a market condition that vest based on the Company’s relative total shareholder return as compared to a peer group of companies (rTSR PSU). In Q1 2024, we began to issue PSU for which the number of shares issuable is based on our performance relative to specified operating margin targets (OM PSU). For EPS and OM PSU, the number of units reflect the estimated number of shares to be issued at the end of the performance period. For rTSR PSU, the number of units reflect the estimated number of shares to be issued based on performance as of the current reporting 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 Options(1) |  | Weighted-Average Exercise Price
Outstanding at December 31, 2023 | 35 |  |  | $ | 330.25 |  |  | 16 |  |  | $ | 87.74 |
Cancelled | (35) |  |  | $ | 330.25 |  |  | (16) |  |  | $ | 87.74 |
Outstanding at September 29, 2024 | — |  |  | $ | — |  |  | — |  |  | $ | — |
_____________ (1)In connection with the GRAIL acquisition, we issued replacement performance stock options to GRAIL employees in 2021. In connection with the GRAIL Spin-Off, all outstanding performance stock options were assumed by GRAIL. Liability-Classified Awards Prior to the GRAIL Spin-Off, we granted cash-based equity incentive awards to GRAIL employees, which were accounted for as liability-classified awards. In connection with the Spin-Off, these awards were assumed by GRAIL. Cash-based equity incentive award activity was as follows:
In millions |
Outstanding at December 31, 2023 | $ | 292 |
Granted | 67 |
Vested and paid in cash | (54) |
Cancelled | (13) |
Change in fair value | (9) |
Derecognition for GRAIL Spin-Off(1) | (283) |
Outstanding at September 29, 2024 | $ | — |
_____________ (1)The estimated liability immediately prior to the Spin-Off, recorded in accrued liabilities, was $53 million, which was disposed of as part of GRAIL’s net assets. See note 2. GRAIL Spin-Off for additional details. We recognized share-based compensation expense on these cash-based equity incentive awards of $52 million in YTD 2024, prior to the Spin-Off, and $26 million and $72 million in Q3 2023 and YTD 2023, respectively. In connection with the acquisition of GRAIL, we assumed a performance-based award for which vesting was based on GRAIL’s future revenues and had an aggregate potential value of up to $78 million. Prior to the GRAIL Spin-Off, it was not probable that the performance conditions associated with the award would be achieved and, therefore, no share-based compensation expense was recognized in the condensed consolidated statements of operations. In connection with the Spin-Off, this award was assumed by GRAIL. For a period of 2.5 years following the Spin-Off, we are obligated to indemnify GRAIL for cash payments that become earned and payable related to this award. The indemnification is accounted for in accordance with ASC 460. As of September 29, 2024, we recognized a non-contingent liability of $1 million for this indemnification, with a corresponding charge to additional paid-in capital. Employee Stock Purchase Plan (ESPP) The price at which common stock is purchased under the 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 2024, approximately 0.5 million shares were issued under the plan. As of September 29, 2024, there were approximately 12.4 million shares available for issuance under the ESPP, which reflects an upward adjustment of approximately 0.5 million shares pursuant to the terms of the plan to account for the GRAIL Spin-Off. The assumptions used and the resulting estimate of weighted-average fair value per share for stock purchased under the ESPP during YTD 2024 were as follows:
Risk-free interest rate | 4.35% - 5.54%
Expected volatility | 41% - 49%
Expected term | 0.5 - 1.1 year
Expected dividends | 0 | %
Weighted-average grant-date fair value per share | $ | 37.24 |
Share Repurchases In August 2024, our Board of Directors authorized a new share repurchase program, which cancels and supersedes all prior and available repurchase authorizations, to repurchase up to $1.5 billion of our outstanding common stock. The repurchases may be completed through open market purchases, pursuant to Rule 10b5-1 or Rule 10b-18, or through an accelerated share repurchase program. Authorizations to repurchase up to $1.4 billion of our outstanding common stock remained available as of September 29, 2024. Share repurchase activity during Q3 2024 was as follows:
In millions, except shares in thousands |
Number of shares repurchased | 770 |
Total cost of shares repurchased(1) | $ | 99 |
_____________ (1)Total cost of shares repurchased includes the 1% excise tax imposed as part of the Inflation Reduction Act of 2022, which is calculated based on share repurchases, net of certain share issuances, and was immaterial for Q3 2024. Share-Based Compensation Share-based compensation expense, which includes expense for both equity and liability-classified awards, reported in our condensed consolidated statements of operations was as follows:
In millions | Q3 2024 |  | Q3 2023 |  | YTD 2024 |  | YTD 2023
Cost of product revenue | $ | 7 |  |  | $ | 7 |  |  | $ | 19 |  |  | $ | 22 |
Cost of service and other revenue | 1 |  |  | 2 |  |  | 5 |  |  | 5 |
Research and development | 33 |  |  | 36 |  |  | 115 |  |  | 117 |
Selling, general and administrative | 43 |  |  | 41 |  |  | 152 |  |  | 142 |
Share-based compensation expense, before taxes | 84 |  |  | 86 |  |  | 291 |  |  | 286 |
Related income tax benefits | (18) |  |  | (19) |  |  | (66) |  |  | (65) |
Share-based compensation expense, net of taxes | $ | 66 |  |  | $ | 67 |  |  | $ | 225 |  |  | $ | 221 |
As of September 29, 2024, unrecognized compensation cost, related to restricted stock and ESPP shares issued to date, of $655 million was expected to be recognized over a weighted-average period of approximately 2.5 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 -Topic 505 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/505/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 718 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/718/tableOfContent + Details
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