Stockholders' Equity And Stock-Based Compensation | . Stockholders' Equity & Stock-Based Compensation We provide stock-based awards as a form of compensation for employees, officers and directors. We have issued stock-based awards in the form of stock options, RSUs and SARs under our equity incentive plans, as well as shares under our ESPP. Common Stock - Class A and Class B Our Board of Directors has authorized two classes of common stock, Class A and Class B. At September 25, 2015 , we had authorized 500,000,000 Class A shares and 500,000,000 Class B shares. At September 25, 2015 , we had 50,291,426 shares of Class A common stock and 50,743,311 shares of Class B common stock issued and outstanding. Holders of our Class A and Class B common stock have identical rights, except that holders of our Class A common stock are entitled to one vote per share and holders of our Class B common stock are entitled to ten votes per share. Shares of Class B common stock can be converted to shares of Class A common stock at any time at the option of the stockholder and automatically convert upon sale or transfer, except for certain transfers specified in our amended and restated certificate of incorporation. Stock Incentive Plans 2000 Stock Incentive Plan. Effective October 2000, we adopted the 2000 Stock Incentive Plan. The 2000 Stock Incentive Plan, as amended, provides for the issuance of incentive and non-qualified stock options to our employees, directors, and consultants to purchase up to 15.1 million shares of Class B common stock. Under the terms of this plan, options became exercisable as established by the Board of Directors (ratably over four years ), and expire ten years after the date of the grant. Options issued under the plan were made at their grant-date fair market value. Subsequent to fiscal 2005, no further options were granted under this plan. The 2000 Stock Incentive Plan terminated on October 1, 2010 and no shares of our common stock remained available for future issuance under that plan other than pursuant to outstanding options. During fiscal 2015, the remaining options outstanding under this plan were exercised. As of September 25, 2015 , there were no outstanding options to purchase shares of Class B common stock. 2005 Stock Plan. In January 2005, our stockholders approved our 2005 Stock Plan, which our Board of Directors adopted in November 2004. The 2005 Stock Plan became effective on February 16, 2005, the day prior to the completion of our IPO. Our 2005 Stock Plan, as amended and restated, provides for the ability to grant ISOs, NQs, restricted stock, RSUs, SARs, deferred stock units, performance units, performance bonus awards and performance shares. A total of 29.0 million shares of our Class A common stock is authorized for issuance under the 2005 Stock Plan. For awards granted prior to February 2011, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as two shares for every one share subject to the award, and if returned to the 2005 Stock Plan, such shares will be counted as two shares for every one share returned. For those awards granted from February 2011 onward, any shares subject to an award with a per share price less than the fair market value of our Class A common stock on the date of grant and any shares subject to an outstanding RSU award will be counted against the authorized share reserve as 1.6 shares for every one share subject to the award, and if returned to the 2005 Stock Plan, such shares will be counted as 1.6 shares for every one share returned. Stock Options. Stock options are generally granted at fair market value on the date of grant. Options granted to employees and officers prior to June 2008 generally vest over four years , with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or 3 months after termination of service. Options granted to employees and officers from June 2008 onward generally vest over four years , with 25% of the shares subject to the option becoming exercisable on the one-year anniversary of the grant date and the balance of the shares vesting in equal monthly installments over the following 36 months . These options expire on the earlier of 10 years after the date of grant or 3 months after termination of service. All options granted vest over the requisite service period and upon the exercise of stock options, we issue new shares of Class A common stock under the 2005 Stock Plan and new shares of Class B common stock under the 2000 Stock Incentive Plan. Our 2005 Stock Plan also allows us to grant stock awards which vest based on the satisfaction of specific performance criteria. The following tables summarize information about stock options issued under our 2000 Stock Incentive Plan and 2005 Stock Plan. As mentioned above, all remaining options outstanding to purchase shares of our Class B common stock were exercised during fiscal 2015, and therefore there were no outstanding options to purchase shares of Class B common stock as of September 25, 2015 . Accordingly, all outstanding options as of September 25, 2015 shown within the table below (including those vested and exercisable) relate to shares of our Class A common stock. Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value (1) (in thousands) (in years) (in thousands) Options outstanding at September 26, 2014 7,611 $ 32.96 Grants 2,573 42.45 Exercises (717 ) 28.14 Forfeitures and cancellations (632 ) 36.67 Options outstanding at September 25, 2015 8,835 35.85 7.2 $ 8,591 Options vested and expected to vest at September 25, 2015 8,438 35.57 7.1 8,582 Options exercisable at September 25, 2015 4,527 $ 32.35 5.8 7,856 (1) Aggregate intrinsic value is based on the closing price of our common stock on September 25, 2015 of $31.40 and excludes the impact of options that were not in-the-money. The following table summarizes information about stock options outstanding and exercisable at September 25, 2015 : Outstanding Options Options Exercisable Range of Exercise Price Shares Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price Shares Weighted-Average Exercise Price (in thousands) (in years) (in thousands) $13.90 - $24.59 22 0.5 $ 18.39 22 $ 18.39 $24.60 - $28.90 1,876 4.7 27.82 1,779 27.81 $28.91 - $33.40 1,647 6.7 30.48 1,145 30.42 $33.41 - $37.33 248 6.3 35.09 154 34.70 $37.34 - $47.45 4,981 8.4 40.55 1,366 38.94 $47.46 - $58.07 41 3.6 49.00 41 49.00 $58.08 - $62.29 20 5.2 59.69 20 59.69 8,835 4,527 Restricted Stock Units. Beginning in fiscal 2008, we began granting RSUs to certain directors, officers and employees under our 2005 Stock Plan. Awards granted to employees and officers generally vest over four years , with equal annual cliff-vesting. Awards granted to directors prior to November 2010 generally vest over three years , with equal annual cliff-vesting. Awards granted after November 2010 and prior to fiscal 2014 to new directors vest over two years , with 50% vesting per year, while awards granted from November 2010 onward to ongoing directors generally vest over one year . Awards granted to new directors from fiscal 2014 onward vest on the earlier of the first anniversary of the award’s date of grant, or the day immediately preceding the date of the next annual meeting of stockholders that occurs after the award’s date of grant. Our 2005 Stock Plan also allows us to grant RSUs which vest based on the satisfaction of specific performance criteria, although no such awards have been granted as of September 25, 2015 . At each vesting date, the holder of the award is issued shares of our Class A common stock. Compensation expense from these awards is equal to the fair market value of our common stock on the date of grant and is recognized on a straight-line basis over the requisite service period. The following table summarizes information about RSUs issued under our 2005 Stock Plan: Shares Weighted-Average Grant Date Fair Value (in thousands) Non-vested at September 26, 2014 2,903 $ 35.79 Granted 1,322 41.89 Vested (1,108 ) 31.37 Forfeitures (287 ) 32.25 Non-vested at September 25, 2015 2,830 $ 40.73 The fair value as of the respective vesting dates of RSUs was as follows (in thousands): Fiscal Year Ended September 25, September 26, September 27, Restricted stock units - vest date fair value $ 45,175 $ 40,810 $ 27,013 Stock Appreciation Rights. We have previously granted SARs to certain of our foreign employees. These awards are settled in cash rather than stock, and are classified as liability awards. This liability is classified within other non-current liabilities in our consolidated balance sheets. Employee Stock Purchase Plan . Our plan allows eligible employees to have up to 10 percent of their eligible compensation withheld and used to purchase Class A common stock, subject to a maximum of $25,000 worth of stock purchased in a calendar year or no more than 1,000 shares in an offering period, whichever is less. An offering period consists of successive six-month purchase periods, with a look back feature to our stock price at the commencement of a one-year offering period. The plan provides for a discount equal to 15 percent of the closing price of our common stock on the New York Stock Exchange on the last day of the purchase period and for overlapping one-year offering periods. The plan also includes an automatic reset feature that provides for an offering period to be reset and recommenced to a new lower-priced offering if the offering price of a new offering period is less than that of the immediately preceding offering period. Stock Option Valuation Assumptions We use the Black-Scholes option pricing model to determine the estimated fair value of employee stock options at the date of the grant. The Black-Scholes model includes inputs that require us to make certain estimates and assumptions regarding the expected term of the award, as well as the future risk-free interest rate, and the volatility of our stock price over the expected term of the award. Expected Term. The expected term of an award represents the estimated period of time that options granted will remain outstanding, and is measured from the grant date to the date at which the option is either exercised or canceled. Our determination of the expected term involves an evaluation of historical terms and other factors such as the exercise and termination patterns of our employees who hold options to acquire our common stock, and is based on certain assumptions made regarding the future exercise and termination behavior. Risk-Free Interest Rate. The risk-free interest rate is based on the yield curve of United States Treasury instruments in effect on the date of grant. In determining an estimate for the risk-free interest rate, we use average interest rates based on these instruments’ constant maturities with a term that approximates and corresponds with the expected term of our awards. Expected Stock Price Volatility. The expected volatility represents the estimated volatility in the price of our common stock over a time period that approximates the expected term of the awards, and is determined using a blended combination of historical and implied volatility. Historical volatility is representative of the historical trends in our stock price for periods preceding the measurement date for a period that is commensurate with the expected term. Implied volatility is based upon externally traded option contracts of our common stock. Dividend Yield. The dividend yield is based on our anticipated dividend payout over the expected term of our option awards. Aside from a special cash dividend paid in fiscal 2013 that was considered a one-time occurrence, the expected dividend yield for all option awards granted up until our fiscal year ended September 26, 2014, was zero. This reflected management’s intention that no dividends would be paid. As described within Part II, Item 5 " Market For Registrant's Common Equity, Related Stockholder Matters And Issuer Purchases Of Equity Securities ", we announced that our Board of Directors approved the initiation of a quarterly dividend to its stockholders on October 23, 2014 . Dividend declarations and the establishment of future record and payment dates are subject to the Board of Directors’ continuing determination that the dividend policy is in the best interests of our stockholders. The dividend policy may be changed or canceled at the discretion of the Board of Directors at any time. The weighted-average assumptions used in the determination of the fair value of our stock options were as follows: Fiscal Year Ended September 25, September 26, September 27, Expected term (in years) 4.64 4.58 4.37 Risk-free interest rate 1.5 % 1.4 % 0.5 % Expected stock price volatility 29.6 % 32.0 % 40.1 % Dividend yield 0.9 % — % — % The following table summarizes the weighted-average fair value (per share) of stock options granted and the total intrinsic value of stock options exercised (in thousands): Fiscal Year Ended September 25, September 26, September 27, Stock options granted - weighted-average grant date fair value $ 10.54 $ 11.11 $ 10.23 Stock options exercised - intrinsic value 8,546 15,300 3,781 Compensation Expense Stock-based compensation expense for equity awards granted to employees is determined by estimating their fair value on the date of grant, and recognizing that value as an expense on a straight-line basis over the requisite service period in which our employees earn the awards. Compensation cost recorded in our consolidated statements of operations related to these equity awards is recognized net of estimated forfeitures, which reduces the gross value of awards such that compensation expense included within our consolidated financial statements reflects our estimate of the number of share-based payment awards that will actually eventually vest. Our methodology used to derive estimated forfeiture rates is based on an evaluation of historical forfeitures. We revise our estimates, if necessary, in subsequent periods if actual forfeitures differ from our estimates. Beginning in fiscal 2015, we revised the method under which we estimate forfeitures. The impact of this change in estimate was not material. The estimated forfeiture rates used for awards granted were 9.98% in fiscal 2015 and 6.13% in fiscal 2014 and fiscal 2013, respectively. The following two tables separately present stock-based compensation expense both by award type and classification in our consolidated statements of operations (in thousands). Compensation Expense - By Award Type Fiscal Year Ended September 25, September 26, September 27, 2013 Compensation Expense - By Type Stock options $ 22,972 $ 19,680 $ 21,334 Restricted stock units 40,332 42,221 39,644 Employee stock purchase plan 3,765 3,779 3,350 Total stock-based compensation 67,069 65,680 64,328 Benefit from income taxes (19,606 ) (19,315 ) (19,316 ) Total stock-based compensation, net of tax $ 47,463 $ 46,365 $ 45,012 Compensation Expense - By Income Statement Line Item Classification Fiscal Year Ended September 25, September 26, September 27, Compensation Expense - By Classification Cost of products $ 949 $ 812 $ 765 Cost of services 457 402 387 Research and development 18,682 18,510 17,117 Sales and marketing 24,283 23,236 21,507 General and administrative 22,698 22,720 22,685 Restructuring — — 1,867 Total stock-based compensation 67,069 65,680 64,328 Benefit from income taxes (19,606 ) (19,315 ) (19,316 ) Total stock-based compensation, net of tax $ 47,463 $ 46,365 $ 45,012 The tax benefit that we recognize from certain exercises of ISOs and shares issued under our ESPP are excluded from the tables above. This benefit was as follows (in thousands): Fiscal Year Ended September 25, September 26, September 27, 2013 Tax benefit - stock option exercises & shares issued under ESPP $ 328 $ 538 $ 417 Unrecognized Compensation Expense. At September 25, 2015 , total unrecorded compensation expense associated with employee stock options expected to vest was $38.5 million , which is expected to be recognized over a weighted-average period of 2.4 years. At September 25, 2015 , total unrecorded compensation expense associated with RSUs expected to vest was $73.9 million , which is expected to be recognized over a weighted-average period of 2.6 years. Special Dividend and Equity Award Modification During the first quarter of fiscal 2013, our Board of Directors declared a special dividend of $4.00 per share on our Class A and Class B common stock. Payment of the dividend was also made during the first quarter of fiscal 2013, and based on the 102,051,386 shares of Class A and Class B common stock outstanding as of the December 27, 2012 record date, the total dividend payment amounted to $408.2 million . In connection with the declaration of this dividend in the first quarter of fiscal 2013 , we adjusted the number and exercise price of certain eligible outstanding stock options and SARs granted under our 2005 Stock Plan and 2000 Stock Incentive Plan in a manner intended to preserve the pre-cash dividend economic value of these awards. Eligible awards include stock options and SARs that were granted prior to December 2012 and were outstanding as of the day following the record date, with the exception of stock options held by employees in Australia that were not adjusted due to tax considerations. The modification of these existing awards at the dividend declaration date resulted in a total net incremental compensation cost of approximately $7.9 million , which is being recognized over the vesting periods of the original awards, determined on a grant-by-grant basis, based on the extent to which the awards were vested as of the date of modification. The incremental charge related to all fully-vested awards as of the modification date was recognized immediately in the first quarter of fiscal 2013 , while the vesting period for those awards not fully-vested at the time of modification range from one to four years. Of the total incremental charge, $1.1 million , $1.2 million and $4.6 million was recognized in fiscal 2015 , fiscal 2014 and fiscal 2013 , respectively. Additionally, all outstanding RSUs under the 2005 Stock Plan that were unvested on the day following the record date, including RSUs that were granted on the record date, were modified to allow for the granting of a dividend equivalent (as such term is defined in the 2005 Stock Plan) with respect to each share of our Class A common stock underlying the unvested RSU. The dividend equivalent is payable in cash in a per share amount equal to the per share cash dividend on the same date that the related underlying RSU shares vest. The granting of the dividend equivalent for all outstanding RSUs resulted in a total net incremental compensation cost of approximately $11.9 million , which is being recognized over the remaining vesting periods of the RSUs at the date of modification, determined on a grant-by-grant basis. These vesting periods range from one to four years beginning on the first anniversary of the grant. Of the total incremental charge, $2.4 million , $3.0 million and $4.3 million was recognized in fiscal 2015 , fiscal 2014 and fiscal 2013 , respectively. Common Stock Repurchase Program In November 2009 , we announced a stock repurchase program ("program"), providing for the repurchase of up to $250.0 million of our Class A common stock. The following table summarizes the initial amount of authorized repurchases as well as additional repurchases approved by our Board of Directors as of September 25, 2015 (in thousands): Authorization Period Authorization Amount Fiscal 2010: November 2009 $ 250,000 Fiscal 2010: July 2010 300,000 Fiscal 2011: July 2011 250,000 Fiscal 2012: February 2012 100,000 Fiscal 2015: October 2014 200,000 Total $ 1,100,000 Stock repurchases under the program may be made through open market transactions, negotiated purchases, or otherwise, at times and in amounts that we consider appropriate. The timing of repurchases and the number of shares repurchased depend upon a variety of factors including price, regulatory requirements, the rate of dilution from our equity compensation plans and other market conditions. The program does not have a specified expiration date, and can be limited, suspended or terminated at our discretion at any time without prior notice. Shares repurchased under the program will be returned to the status of authorized but unissued shares of Class A common stock. As of September 25, 2015 , the remaining authorization to purchase additional shares is $152.7 million . The following table provides information regarding share repurchase activity under the program during fiscal 2015 : Quarterly Repurchase Activity Shares Repurchased Cost (1) Average Price Paid Per Share (2) (in thousands) Q1 - Quarter ended December 26, 2014 389,500 $ 16,953 $ 43.51 Q2 - Quarter ended March 27, 2015 390,000 15,411 39.47 Q3 - Quarter ended June 26, 2015 390,000 15,592 39.96 Q4 - Quarter ended September 25, 2015 1,769,399 59,393 33.55 Total 2,938,899 $ 107,349 (1) Cost of share repurchases includes the price paid per share and applicable commissions. (2) Average price paid per share excludes commission costs. Dividend In October 2014, our Board of Directors initiated a recurring quarterly dividend program for our stockholders. The following table summarizes the dividend payments made under the program: Fiscal Period Declaration Date Record Date Payment Date Cash Dividend Per Common Share Dividend Payment Fiscal 2014 Q4 - Quarter ended September 26, 2014 October 21, 2014 November 3, 2014 November 20, 2014 $ 0.10 $10.2 million Fiscal 2015 Q1 - Quarter ended December 26, 2014 January 19, 2015 February 2, 2015 February 10, 2015 $ 0.10 $10.3 million Q2 - Quarter ended March 27, 2015 April 20, 2015 May 4, 2015 May 12, 2015 $ 0.10 $10.3 million Q3 - Quarter ended June 26, 2015 July 20, 2015 August 3, 2015 August 11, 2015 $ 0.10 $10.2 million Q4 - Quarter ended September 25, 2015 October 19, 2015 November 2, 2015 November 10, 2015 $ 0.12 $12.1 million |