STOCKHOLDERS' EQUITY

Stock Repurchase Programs

In May 2010, our Board authorized a three-year, $5.00 billion stock repurchase program. We completed this program in September 2011. In January 2011, our Board authorized another three-year, $5.00 billion stock repurchase program. We initiated purchases under this program in September 2011 upon completion of our May 2010 stock repurchase program.

As of December 31, 2011, we had repurchased $403.1 million of our common stock under our January 2011 stock repurchase program and the remaining authorized amount of stock repurchases that may be made under this plan was $4.60 billion. In 2011, we spent a total of $2.38 billion to repurchase and retire 119.8 million shares of our common stock at an average purchase price of $19.90 per share.

As of December 31, 2012, we had repurchased $1.07 billion of our common stock under January 2011 stock repurchase program and the remaining authorized amount of stock repurchases that may be made under this plan was $3.93 billion. In 2012, we spent a total of $666.9 million to repurchase and retire 23.1 million shares of our common stock at an average purchase price of $28.93 per share.

As of December 31, 2013, we had repurchased $1.65 billion of our common stock under our January 2011 stock repurchase program and the remaining authorized amount of stock repurchases that may be made under this plan was $3.35 billion. In 2013, we spent a total of $582.2 million to repurchase and retire 9.6 million shares of our common stock at an average purchase price of $60.78 per share.

We use the par value method of accounting for our stock repurchases. Under the par value method, common stock is first charged with the par value of the shares involved. The excess of the cost of shares acquired over the par value is allocated to APIC based on an estimated average sales price per issued share with the excess amounts charged to retained earnings.

In addition to repurchases from our stock repurchase program, we repurchased shares of common stock withheld by us from employee restricted stock awards to satisfy our applicable tax withholding obligations. The following table summarizes the reduction of common stock and APIC and the charge to retained earnings as a result of our stock repurchases (in thousands):



	Year ended December 31,
	2013		2012		2011
Reduction of common stock and APIC	$	14,076	$	40,585	$	186,174
Charge to retained earnings	$	674,308	$	663,582	$	2,210,607

Preferred Stock

We have 5.0 million shares of authorized preferred stock issuable in series. Our Board is authorized to determine the designation, powers, preferences and rights of any such series. There was no preferred stock outstanding as of December 31, 2013 and 2012.

Rights Plan

In September 2012, we terminated our Rights Plan.

Accumulated Other Comprehensive Income

The following table summarizes the changes in accumulated OCI by component, net of tax (in thousands):



	Foreign Currency Items			Unrealized Gains and Losses on Available-for-Sale Securities			Unrealized Gains and Losses on Cash Flow Hedges			Total
Balance at December 31, 2012	$	(1,420	)	$	7,502		$	(51,697	)	$	(45,615	)
Other comprehensive income (loss) before reclassifications	(44,440		)	4,867			(59,653		)	(99,226		)
Amounts reclassified from accumulated other comprehensive income	—			(462		)	20,857			20,395
Net current period other comprehensive income (loss)	(44,440		)	4,405			(38,796		)	(78,831		)
Balance at December 31, 2013	$	(45,860	)	$	11,907		$	(90,493	)	$	(124,446	)

For 2013, amounts reclassified for gains (losses) on cash flow hedges were recorded as part of product sales on our Consolidated Statements of Income. Amounts reclassified for unrealized gains (losses) on available-for-sale securities were recorded as part of other income (expense), net on our Consolidated Statements of Income.

2004 Equity Incentive Plan

In May 2004, our stockholders approved and we adopted the Gilead Sciences, Inc. 2004 Equity Incentive Plan (the 2004 Plan), which replaced all of our existing equity plans (Prior Plans). The remaining shares that were available for future grants under the Prior Plans were transferred to the 2004 Plan and additionally, if awards granted under the Prior Plans expire or otherwise terminate without being exercised, the shares of our common stock reserved for such awards are added back to the pool of available shares of common stock under the 2004 Plan. The 2004 Plan is a broad based incentive plan that provides for the grant of equity-based awards, including stock options, restricted stock units, restricted stock awards and performance awards, to employees, directors and consultants. Under the 2004 Plan, we are authorized to issue a maximum of 50.0 million shares of full-value awards, such as restricted stock, restricted stock units, performance shares, performance units (to the extent settled in common stock) and phantom shares over the term of the Plan. The 2004 Plan authorizes the issuance of a total of 243.2 million shares of common stock. As of December 31, 2013, a total of 76.8 million shares remain available for future grant under the 2004 Plan.

Stock Options

The 2004 Plan provides for option grants designated as either non-qualified or incentive stock options. Prior to January 1, 2006, we granted both non-qualified and incentive stock options, but all stock options granted after January 1, 2006 have been non-qualified stock options. Under the 2004 Plan, employee stock options granted prior to 2011 generally vest over five years and stock options granted starting in 2011 generally vest over four years. All options are exercisable over a period not to exceed the contractual term of ten years from the date the stock options are issued and are granted at prices not less than the fair market value of our common stock on the grant date. Stock option exercises are settled with common stock from the 2004 Plan's previously authorized and available pool of shares.

In connection with the acquisition of Arresto, we assumed the Arresto 2007 Equity Incentive Plan (the Arresto Plan). The options that were issued and outstanding under the Arresto Plan have been converted into options to purchase our common stock effective January 14, 2011. The number of converted options to purchase our common stock is not significant. There are no shares available for future grant under the Arresto Plan.

The following table summarizes activity and related information under our stock option plans. All option grants presented in the table had exercise prices not less than the fair value of the underlying common stock on the grant date (shares and aggregate intrinsic value in thousands):



	Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2012	72,247		$	17.21
Granted and assumed	2,155		$	41.65
Forfeited	(668	)	$	24.57
Expired	(20	)	$	12.43
Exercised	(19,011	)	$	13.58
Outstanding at December 31, 2013	54,703		$	19.34	4.1	$	3,049,967
Exercisable at December 31, 2013	47,035		$	18.02	3.5	$	2,684,613
Expected to vest, net of estimated forfeitures at December 31, 2013	7,215		$	27.05	7.5	$	346,673

Aggregate intrinsic value represents the value of the Company's closing stock price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable. Total intrinsic value of options exercised was $836.5 million during 2013, $500.0 million during 2012 and $194.5 million during 2011.

The weighted-average grant date fair values of the stock options granted was $12.41 per share during 2013, $7.60 per share during 2012 and $6.17 per share during 2011.

As of December 31, 2013, there was $51.4 million of unrecognized compensation cost related to stock options, which is expected to be recognized over an estimated weighted-average period of 1.9 years.

Performance Awards

Under the 2004 Plan, we grant performance-based restricted stock units which vest upon the achievement of specified market or performance goals, which could include achieving a total shareholder return compared to a pre-determined peer group or achieving revenue targets. The actual number of common shares ultimately issued is calculated by multiplying the number of performance units by a payout percentage ranging from 0% to 200% and these awards generally vest only when a committee (or subcommittee) of our Board has determined that the specified market and performance goals have been achieved. The approval from the committee is generally obtained within a three year period. The fair value of each performance share is estimated at the date of grant or when performance objectives are defined for the grants. Depending on the terms of the award, fair value on the date of grant is determined based on either the Monte Carlo valuation methodology or the stock price on the date of grant.

In addition, we have also granted other performance-based restricted stock awards to certain of our employees under the 2004 Plan. The vesting of these awards is subject to the achievement of specified individual performance goals, typically within a one year period. The fair value of such an award is equal to the closing price of our common stock on the grant date.

The following table summarizes activity and related information for all of our performance awards (in thousands, except per share amounts):



	Shares		Weighted-Average Grant-Date Fair Value Per Share ⁽¹⁾
Outstanding at December 31, 2012	2,785		$	22.11
Granted	398		$	30.16
Vested	(417	)	$	26.99
Forfeited	(488	)	$	26.56
Outstanding at December 31, 2013	2,278		$	24.06

⁽¹⁾ Weighted-average grant-date fair value per share excludes shares related to grants that currently have no grant-date fair value as the performance objectives have not yet been defined.

The weighted-average grant date fair values of our performance awards granted was $30.16 per share during 2013, $20.67 per share during 2012 and $19.17 per share during 2011. The total fair value of our performance awards vested was $11.3 million during 2013, $19.7 million during 2012 and $18.9 million during 2011.

We recognized stock-based compensation expenses of $25.3 million during 2013, $24.1 million during 2012 and $25.2 million during 2011 related to these performance awards. As of December 31, 2013, there was $10.9 million of unrecognized compensation costs related to these performance awards, which is expected to be recognized over an estimated weighted-average period of 0.8 years.

Restricted Stock Units

We grant time-based restricted stock units (RSUs) to certain employees as part of our annual employee equity compensation review program as well as to new hire employees and to non-employee members of our Board. RSUs are share awards that entitle the holder to receive freely tradable shares of our common stock upon vesting. For awards granted prior to 2011, RSUs vest ratably on an annual basis over five years from the date of grant. Starting January 1, 2011, RSUs vest over four years from the date of grant.

The fair value of an RSU is equal to the closing price of our common stock on the grant date. The following table summarizes our RSU activities and related information (in thousands, except per share amounts):



	Shares		Weighted-Average Grant-Date Fair Value Per Share
Outstanding at December 31, 2012	17,175		$	24.17
Granted and assumed	6,236		$	48.61
Vested	(5,002	)	$	23.63
Forfeited	(1,108	)	$	27.39
Outstanding at December 31, 2013	17,301		$	32.89

The weighted-average grant date fair values of RSUs granted was $48.61 per share during 2013, $27.75 per share during 2012 and $19.40 per share during 2011.The total fair value of RSUs that vested was $118.2 million during 2013, $60.0 million during 2012 and $25.4 million during 2011.

As of December 31, 2013, there was $349.5 million of unrecognized compensation cost related to unvested RSUs which is expected to be recognized over a weighted-average period of 2.4 years.

Employee Stock Purchase Plan

Under our Employee Stock Purchase Plan, as amended and the International Employee Stock Purchase Plan (together, the ESPP), employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits. The purchase price per share is equal to the lower of 85% of the fair market value of our common stock on the offering date or the purchase date. The ESPP offers a two-year look-back feature as well as an automatic reset feature that provides for an offering period to be reset to a new lower-priced offering if the offering price of the new offering period is less than that of the current offering period. ESPP purchases are settled with common stock from the ESPP's previously authorized and available pool of shares. During 2013, 2.5 million shares were issued under the ESPP for $54.9 million. A total of 66.6 million shares of common stock have been reserved for issuance under the ESPP, and there were 6.2 million shares available for issuance under the ESPP as of December 31, 2013.

As of December 31, 2013, there was $9.6 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized over an estimated weighted-average period of 0.4 years.