Stock Options and Other Share-Based Compensation

3 Months Ended

Sep. 29, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Options and Other Share-Based Compensation

Stock Options and Other Share-Based Compensation

During the quarter ended September 29, 2017, we had options or other share-based compensation outstanding under two shareholder-approved employee stock incentive plans (“SIPs”), the Harris Corporation 2005 Equity Incentive Plan (As Amended and Restated Effective August 27, 2010) and the Harris Corporation 2015 Equity Incentive Plan (the “2015 EIP”). Grants of share-based awards after October 23, 2015 were made under our 2015 EIP. We believe that share-based awards more closely align the interests of participants with those of shareholders. Certain share-based awards provide for accelerated vesting if there is a change in control (as defined under our SIPs). The compensation cost related to our share-based awards that was charged against income was $11 million and $10 million for the quarters ended September 29, 2017 and September 30, 2016, respectively.

The aggregate number of shares of our common stock that we issued under the terms of our SIPs, net of shares withheld for tax purposes and inclusive of both continuing and discontinued operations, was 331,215 and 542,213 during the quarters ended September 29, 2017 and September 30, 2016, respectively. Awards granted to participants under our 2015 EIP during the quarter ended September 29, 2017 consisted of 411,587 stock options, 713,919 restricted shares and restricted units and 173,407 performance units. The fair value as of the grant date of each stock option award was determined using the Black-Scholes-Merton option-pricing model and the following assumptions: expected dividend yield of 1.82 percent; expected volatility of 19.32 percent; risk-free interest rates averaging 1.77 percent; and expected term in years of 5.00. The fair value as of the grant date of each restricted share award and restricted unit award was based on the closing price of our common stock on the grant date. The fair value as of the grant date of each performance unit award was determined based on the fair value from a multifactor Monte Carlo valuation model that simulates our stock price and total shareholder return (“TSR”) relative to companies in our TSR peer group, less a discount to reflect the delay in payments of cash dividend-equivalents that are made only upon vesting.