Garmin 2008 Annual Report Download - page 98

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76
2008 2007 2006
Weighted average fair value of options granted $18.47 $33.81 $20.01
Expected volatility 0.3845 0.3677 0.3534
Dividend yield 3.75% 0.76% 1.00%
Expected life of options in years 6.0 6.0 6.3
Risk-free interest rate 2% 4% 5%
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price volatility. Because the Company’s
employee stock options have characteristics significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion,
the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock
options. The fair value of the RSUs was determined based on the market value at the date of grant.
The total fair value of awards vested during 2008, 2007, and 2006 was $35,384, $17,840, and $9,413,
respectively. The total stock based compensation expense calculated using the Black-Scholes option valuation
model in 2008, 2007, and 2006 was $38,872, $22,164, and $11,913, respectively.The aggregate intrinsic values of
options outstanding and exercisable at December 27, 2008 were $8.2 million and $8.2 million, respectively. The
aggregate intrinsic value of options exercised during the year ended December 27, 2008 was $0.6 million. Aggregate
intrinsic value represents the positive difference between the Company’s closing stock price on the last trading day
of the fiscal period, which was $19.39 on December 27, 2008, and the exercise price multiplied by the number of
options exercised. As of December 27, 2008, there was $141.7 million of total unrecognized compensation cost
related to unvested share-based compensation awards granted to employees under the stock compensation plans.
That cost is expected to be recognized over a period of five years.
Employee Stock Purchase Plan
The shareholders also adopted an employee stock purchase plan (ESPP). Up to 2,000,000 shares of
common stock have been reserved for the ESPP. Shares will be offered to employees at a price equal to the lesser of
85% of the fair market value of the stock on the date of purchase or 85% of the fair market value on the enrollment
date. The ESPP is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal
Revenue Code. During 2008, 2007, and 2006, 362,902, 120,230, and 124,693 shares, respectively were purchased
under the plan for a total purchase price of $8,782, $5,730, and $3,569, respectively. At December 27, 2008,
approximately 663,679 shares were available for future issuance.
10. Earnings Per Share
The following table sets forth the computation of basic and diluted net income per share: