Cisco 2015 Annual Report Download - page 119

Acquisition Plans In connection with the Company’s acquisitions of Scientific-Atlanta, Inc. (“Scientific-Atlanta”) and WebEx
Communications, Inc. (“WebEx”), the Company adopted the SA Acquisition Plan and the WebEx Acquisition Plan, respectively,
each effective upon completion of the applicable acquisition. These plans constitute assumptions, amendments, restatements, and
renamings of the 2003 Long-Term Incentive Plan of Scientific-Atlanta and the WebEx Communications, Inc. Amended and
Restated 2000 Stock Incentive Plan, respectively. The plans permit the grant of stock options, stock, stock units, and stock
appreciation rights to certain employees of the Company and its subsidiaries and affiliates who had been employed by Scientific-
Atlanta or its subsidiaries or WebEx or its subsidiaries, as applicable. As a result of the shareholder approval of the amendment
and extension of the 2005 Plan, as of November 15, 2007, the Company will no longer make stock option grants or direct share
issuances under either the SA Acquisition Plan or the WebEx Acquisition Plan.
(b) Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which includes its subplan named the International Employee Stock
Purchase Plan (together, the “Purchase Plan”), under which 621 million shares of the Company’s common stock have been
reserved for issuance as of July 25, 2015. Eligible employees are offered shares through a 24-month offering period, which
consists of four consecutive 6-month purchase periods. Employees may purchase a limited number of shares of the Company’s
stock at a discount of up to 15% of the lesser of the market value at the beginning of the offering period or the end of each
6-month purchase period. The Purchase Plan is scheduled to terminate on January 3, 2020. The Company issued 27 million,
27 million, and 36 million shares under the Purchase Plan in fiscal 2015, 2014, and 2013, respectively. As of July 25, 2015,
148 million shares were available for issuance under the Purchase Plan.
(c) Summary of Share-Based Compensation Expense
Share-based compensation expense consists primarily of expenses for stock options, stock purchase rights, restricted stock, and
restricted stock units granted to employees. The following table summarizes share-based compensation expense (in millions):
Years Ended July 25, 2015 July 26, 2014 July 27, 2013
Cost of sales—product ............................................... $50$45$40
Cost of sales—service ................................................ 157 150 138
Share-based compensation expense in cost of sales ................... 207 195 178
Research and development ........................................... 448 411 286
Sales and marketing .................................................. 559 549 484
General and administrative ........................................... 228 198 175
Restructuring and other charges ...................................... (2) (5) (3)
Share-based compensation expense in operating expenses ............ 1,233 1,153 942
Total share-based compensation expense ............................. $ 1,440 $ 1,348 $ 1,120
Income tax benefit for share-based compensation ..................... $ 373 $ 324 $ 285
As of July 25, 2015, the total compensation cost related to unvested share-based awards not yet recognized was $2.4 billion,
which is expected to be recognized over approximately 2.6 years on a weighted-average basis.
(d) Share-Based Awards Available for Grant
A summary of share-based awards available for grant is as follows (in millions):
Years Ended July 25, 2015 July 26, 2014 July 27, 2013
Balance at beginning of fiscal year ................................... 310 228 218
Restricted stock, stock units, and other share-based awards granted . . . (101) (98) (102)
Share-based awards canceled/forfeited/expired ....................... 40 36 115
Additional shares reserved ............................................ —135 —
Shares withheld for taxes and not issued .............................. 27 6—
Other ................................................................. —3 (3)
Balance at end of fiscal year .......................................... 276 310 228
As reflected in the preceding table, for each share awarded as restricted stock or subject to a restricted stock unit award under the
2005 Plan, an equivalent of 1.5 shares was deducted from the available share-based award balance. For restricted stock units that
were awarded with vesting contingent upon the achievement of future financial performance or market-based metrics, the
maximum awards that can be achieved upon full vesting of such awards were reflected in the preceding table.
111