Shareholders' Equity

6 Months Ended

Jul. 01, 2011

Shareholders' Equity

Shareholders' Equity

NOTE 3. SHAREHOLDERS' EQUITY

Stock Repurchase Activities

In January 2008, the Company's Board of Directors authorized a stock repurchase program ("2008 Stock Repurchase Program"), authorizing the Company to repurchase up to $250 million of Trimble's common stock under this program. No shares of common stock were repurchased during the three months and six months ended July 1, 2011. During the three and six months ended July 2, 2010, the Company repurchased approximately 2,360,000 shares of common stock in open market purchases at an average price of $28.69 per share, for a total of $67.7 million. Since January 2008, the Company has repurchased approximately 6,819,000 shares of common stock in open market purchases at an average price of $29.29 per share, for a total of $199.7 million. The purchase price was reflected as a decrease to common stock based on the average stated value per share with the remainder to retained earnings. 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 retired. As of July 1, 2011, the 2008 Stock Repurchase Program had remaining authorized funds of $50.3 million. The timing and actual number of future shares repurchased will depend on a variety of factors including price, regulatory requirements, capital availability, and other market conditions. The program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time without public notice.

Stock-Based Compensation

The Company accounts for its employee stock options and rights to purchase shares under its stock participation plans under the fair value method, which requires the fair value of stock-based compensation to be estimated on the date of grant using an option-pricing model. 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, net of tax, related to employee stock-based compensation included in the Condensed Consolidated Statements of Income for the three and six months ended July 1, 2011 and July 2, 2010.

	Three Months Ended						Six Months Ended
	July 1, 2011			July 2, 2010			July 1, 2011			July 2, 2010
(Dollars in thousands)
Cost of sales	$	502		$	486		$	970		$	987
Research and development		1,126			984			2,222			1,931
Sales and marketing		1,659			1,347			3,293			2,730
General and administrative		3,842			2,167			7,442			4,977
Total operating expenses		6,627			4,498			12,957			9,638
Total stock-based compensation expense		7,129			4,984			13,927			10,625
Tax benefit (1)		(2,139	)		(1,419	)		(4,342	)		(2,195	)
Total stock-based compensation expense, net of tax	$	4,990		$	3,565		$	9,585		$	8,430

(1) Tax benefit related to U.S. non-qualified options, restricted stock units, and disqualified disposition of incentive stock options, applying a Federal statutory and State (Federal effected) tax rate for the respective periods.

Options

Stock option expense recognized during the period is based on the fair value of the portion of the stock option that is expected to vest during the period and is net of estimated forfeitures. The fair value of each stock option is estimated on the date of grant using a binomial valuation model. The binomial model takes into account variables such as volatility, dividend yield rate, and risk free interest rate. For options granted during the three and six months ended July 1, 2011 and July 2, 2010, the following weighted average assumptions were used:

	Three Months Ended						Six Months Ended
	July 1, 2011			July 2, 2010			July 1, 2011			July 2, 2010
Expected dividend yield		0			0			0			0
Expected stock price volatility		43.7	%		43.7	%		43.6	%		43.8	%
Risk free interest rate		1.6	%		1.8	%		1.6	%		1.8	%
Expected life of option		4.2 years			4.2 years			4.2 years			4.2 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 Option – 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.