SHAREHOLDERS' EQUITY

9 Months Ended

Oct. 02, 2015

Equity [Abstract]

SHAREHOLDERS' EQUITY

SHAREHOLDERS’ EQUITY

Stock Repurchase Activities

In August 2014, the Company's Board of Directors approved a stock repurchase program (2014 Stock Repurchase Program), authorizing the Company to repurchase up to $300.0 million of Trimble’s common stock, replacing a stock repurchase program which had been in place since 2011. In August 2015, the Company’s Board of Directors approved a stock repurchase program (2015 Stock Repurchase Program), authorizing the Company to repurchase up to $400.0 million of Trimble’s common stock, replacing the 2014 Stock Repurchase Program.

During the first three quarters of fiscal 2015, the Company repurchased approximately 7.5 million shares of common stock in open market purchases, at an average price of $21.29 per share, for a total of $159.4 million. This total includes $75.1 million and $84.3 million of open market purchases completed under the 2015 and 2014 Stock Repurchase Programs, respectively.

In addition, in September 2015, the Company entered into an accelerated share repurchase agreement, or ASR, with an investment bank, under which the Company made an upfront payment of $75 million to purchase shares of its common stock and received an initial delivery of 3.7 million shares. The final number of shares to be repurchased will be based on the volume-weighted average share price of Trimble’s common stock during the term of the ASR, minus a discount. The final settlement of the transactions under the ASR agreement will take place in the fourth quarter of 2015.

The Company accounted for the ASR program as two separate transactions: (i) the initial 3.7 million shares received valued at $68.2 million represents a stock repurchase transaction and (ii) the remaining $6.8 million represents a forward contract indexed to the Company's common stock. The initial delivery of 3.7 million shares resulted in an immediate reduction, on the delivery date, of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted net income per share.

During the first three quarters of fiscal 2014, under the provisions of both the 2014 and 2011 Stock Repurchase Programs, the Company repurchased approximately 2.1 million shares of common stock in open market purchases at an average price of $31.20 per share, for a total of $65.0 million.

Stock repurchases are reflected as a decrease to common stock based on the average book value per share for all outstanding shares calculated at the time of each individual repurchase transaction. The excess of the purchase price over this average for each repurchase was charged to retained earnings. As a result of the 2015 repurchases, retained earnings was reduced by $173.7 million in the first three quarters of fiscal 2015. Common stock repurchases under the program were recorded based upon the trade date for accounting purposes. All common shares repurchased under this program have been canceled.

At the end of the third quarter of fiscal 2015, the 2015 Stock Repurchase Program had remaining authorized funds of $249.9 million. Under the share repurchase program, the Company may repurchase shares from time to time in open market transactions, privately negotiated transactions, accelerated share buyback programs, tender offers, or by other means. The timing and amount of repurchase transactions will be determined by the Company’s management based on its evaluation of market conditions, share price, legal requirements and other factors. The program may be suspended, modified or discontinued at any time without prior notice.

Stock-Based Compensation Expense

The Company accounts for its employee stock options, restricted stock units and employee stock purchase plan (ESPP) under the fair value method, which requires stock-based compensation to be estimated using the fair value on the date of grant. The value of the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite service periods in the Company’s Condensed Consolidated Statements of Income.

The following table summarizes stock-based compensation expense related to employee stock-based compensation (for all plans) included in the unaudited Condensed Consolidated Statements of Income for the third quarter and the first three quarters of fiscal 2015 and 2014.

	Third Quarter of				First Three Quarters of
	2015		2014		2015		2014
(Dollars in millions)
Cost of sales	$	1.0	$	0.8	$	2.9	$	2.3
Research and development	2.1		1.6		6.4		4.8
Sales and marketing	2.2		2.0		6.7		6.0
General and administrative	7.5		6.6		21.3		19.0
Total operating expenses	11.8		10.2		34.4		29.8
Total stock-based compensation expense	$	12.8	$	11.0	$	37.3	$	32.1

Fair Value of Trimble Options

Stock option expense recognized in the Condensed Consolidated Statements of Income is based on the fair value of the portion of share-based payment awards that is expected to vest during the period and is net of estimated forfeitures.

The compensation expense related to these awards is valued as of the grant date using a binomial valuation model and is recognized on a straight-line basis over the vesting period, typically four to five years. The binomial model takes into account variables such as volatility, dividend yield rate and risk free interest rate. In addition, the binomial model incorporates actual option-pricing behavior and changes in volatility over the option’s contractual term. For options granted during the third quarter and the first three quarters of fiscal 2015 and 2014, the following weighted average assumptions were used:

	Third Quarter of		First Three Quarters of
	2015	2014	2015	2014
Expected dividend yield	—	—	—	—
Expected stock price volatility	35.4%	35.4%	35.4%	35.4%
Risk free interest rate	1.2%	0.9%	1.4%	1.2%
Expected life of options	3.8 years	3.9 years	4.3 years	4.0 years

Expected Dividend Yield – The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Expected Stock Price Volatility – The Company’s computation of expected volatility is based on a combination of implied volatilities from traded options on the Company’s stock and historical volatility, commensurate with the expected life of the stock options.

Expected Risk Free Interest Rate – The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for the expected life of the stock options.

Expected Life Of Options – The Company’s expected life represents the period that the Company’s stock options are expected to be outstanding and is determined based on historical experience of similar stock options with consideration to the contractual terms of the stock options, vesting schedules and expectations of future employee behavior.

Fair Value of Restricted Stock Units

Restricted stock units are converted into shares of Trimble common stock upon vesting, on a one-for-one basis, and typically vest at the end of three years. The compensation expense related to these awards is valued as of the grant date using the fair value of Trimble’s common stock and is recognized on a straight-line basis over the vesting period.

Fair Value of Employee Stock Purchase Plan

Rights to purchase shares are generally granted during the first and third quarter of each year. The compensation expense related to these rights granted under the Employee Stock Purchase Plan is valued as of the grant date using the Black-Scholes option-pricing model.

Fair Value of Market-Based Restricted Stock Units

Market-based restricted stock units are based on the achievement of the Company’s relative total shareholder return (TSR) of its common stock as compared to the TSR of the constituents of the S&P 500 at the start of the performance period. The number of shares that may be issued will range from 0% to 200% of the units granted. The compensation expense related to these awards is valued as of the grant date using a Monte Carlo simulation and is recognized on a straight-line basis over the vesting period.