Western Digital 2015 Annual Report Download - page 78

WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 8. Shareholders’ Equity
Stock Incentive Plans
In addition to awards assumed in connection with acquisitions, the Company maintains the amended and
restated 2004 Performance Incentive Plan.
The types of awards that may be granted under the 2004 Performance Incentive Plan include stock options,
SARs, RSUs, stock bonuses and other forms of awards granted or denominated in the Company’s common stock or
units of the Company’s common stock, as well as cash bonus awards. Persons eligible to receive awards under the 2004
Performance Incentive Plan include officers and employees of the Company or any of its subsidiaries, directors of the
Company and certain consultants and advisors to the Company or any of its subsidiaries. The vesting of awards under
the 2004 Performance Incentive Plan is determined at the date of grant. Each award expires on a date determined at
the date of grant; however, the maximum term of options and SARs under the 2004 Performance Incentive Plan is ten
years after the grant date of the award. RSUs granted under the 2004 Performance Incentive Plan typically vest over
periods ranging from one to four years from the date of grant. To the extent available, the Company issues shares out
of treasury stock upon the vesting of awards or the exercise of employee stock options and ESPP.
As of July 3, 2015, the maximum number of shares of the Company’s common stock that was authorized for
award grants under the 2004 Performance Incentive Plan was 48.8 million shares. Shares issued in respect of stock
options and SARs granted under the 2004 Performance Incentive Plan count against the plan’s share limit on a one-
for-one basis, whereas shares issued in respect of any other type of award granted through November 7, 2012 under
the plan count against the plan’s share limit as 1.35 shares for every one share actually issued in connection with such
award. Shares issued in respect of awards, other than options and SARs, granted on or after November 8, 2012 count
against the plan’s share limit as 1.72 shares for every one share actually issued in connection with such award. The
2004 Performance Incentive Plan was extended in 2013 and will terminate on August 6, 2022 unless terminated ear-
lier by the Company’s Board of Directors.
Employee Stock Purchase Plan
The Company maintains an ESPP. Under the ESPP, eligible employees may authorize payroll deductions of up
to 10% of their eligible compensation during prescribed offering periods to purchase shares of the Company’s com-
mon stock at 95% of the fair market value of common stock on either the first day of that offering period or on the
applicable exercise date, whichever is less. A participant may participate in only one offering period at a time, and a
new offering period generally begins each June 1st and December 1st. Each offering period is generally 24 months and
consists of four exercise dates (each, generally six months following the start of the offering period or the preceding
exercise date, as the case may be). If the fair market value of the Company’s common stock is less on a given exercise
date than on the date of grant, employee participation in that offering period ends and participants are automatically
re-enrolled in the next new offering period.
Stock-based Compensation Expense
The Company recognized in expense $74 million, $85 million and $88 million for stock-based compensation
related to the vesting of options issued by the Company under the 2004 Performance Incentive Plan and the ESPP in
2015, 2014 and 2013, respectively. The tax benefit realized as a result of the aforementioned stock-based compensa-
tion expense was $19 million, $22 million and $25 million in 2015, 2014 and 2013, respectively. As of July 3, 2015,
total compensation cost related to unvested stock options granted under the 2004 Performance Incentive Plan and
ESPP rights issued to employees but not yet recognized was $96 million and will be amortized on a straight-line basis
over a weighted average service period of approximately 2.0 years.
For purposes of this footnote, references to RSUs include performance stock unit awards (“PSUs”). The effect of
the PSU activity was immaterial to the consolidated financial statements in 2015, 2014 and 2013. The Company
recognized in expense $88 million, $71 million and $52 million related to RSUs granted under the 2004 Performance
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