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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
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 con-
nection with such award. Shares issued in respect of awards 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 Perform-
ance Incentive Plan was extended in 2013 and will terminate on August 6, 2022 unless terminated earlier 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 $88 million, $57 million and $37 million for stock-based compensation
related to the vesting of options issued by the Company under the Stock Plans and the ESPP in 2013, 2012 and 2011,
respectively. The tax benefit realized as a result of the aforementioned stock-based compensation expense was $25
million, $12 million and $8 million in 2013, 2012 and 2011, respectively. As of June 28, 2013, total compensation
cost related to unvested stock options granted under the Stock Plans and ESPP rights issued to employees but not yet
recognized was $105 million and will be amortized on a straight-line basis over a weighted average service period of
approximately 2.2 years.
For purposes of this footnote, references to RSUs include performance stock unit awards ("PSUs") reported at
target. The effect of the PSU activity was immaterial to the consolidated financial statements in 2013 and 2012. The
Company granted approximately 1.7 million RSUs during 2013, which are generally payable in an equal number of
shares of the Company's common stock at the time of vesting of the units. The aggregate market value of the shares
underlying the RSUs was $74 million at the date of grant. The compensation expense for granted and assumed RSUs
is being recognized as expense over the corresponding vesting or measurement periods of the awards. For purposes of
recognizing awards granted, the Company has assumed a weighted average forfeiture rate of 2.0% based on a historical
analysis indicating forfeitures for these types of awards. The Company recognized in expense $52 million, $35 million
and $32 million related to RSUs granted under the Stock Plans that vested during 2013, 2012 and 2011, respectively.
The tax benefit realized as a result of the aforementioned expense was $14 million, $10 million and $12 million in
2013, 2012 and 2011, respectively. As of June 28, 2013, the aggregate unamortized fair value of all unvested RSUs
granted under the Stock Plans was $70 million, which will be recognized on a straight-line basis over a weighted
average vesting period of approximately 1.4 years. In 2013, stock-based compensation expense included $5 million of
accelerated expense associated with the employee termination benefits as discussed in Note 16.
The Company recognized in expense $46 million related to adjustments to market value as well as the vesting of
SARs in 2013 and a benefit of $7 million related to SARs in 2012. The tax benefit realized as a result of the afore-
mentioned SARs expense was $4 million in 2013. There was no tax effect in 2012. The SARs will be settled in cash
upon exercise. As a result, the Company had a total liability of $46 million related to SARs included in accrued
liabilities as of June 28, 2013 in the consolidated balance sheet. As of June 28, 2013, total compensation cost related
to unvested SARs issued to employees but not yet recognized was $11 million and will be recognized on a straight-
line basis over a weighted average service period of approximately 0.8 years.
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