Garmin 2005 Annual Report Download - page 98

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68
0.3927, respectively; and a weighted-average expected life of the option of six years in 2005, 2004, and 2003,
respectively.
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.
Employee Stock Purchase Plan
The stockholders also adopted an employee stock purchase plan (ESPP). Up to 1,000,000 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 2005, 2004, and 2003, 56,399, 58,950, and 70,857 shares were purchased under the plan for
a total purchase price of $2,824, $2,691, and $1,805, respectively. At December 31, 2005, approximately 621,000
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:
Fiscal Year Ended
December 31, December 25, December 27,
2005 2004 2003
Numerator (in thousands):
Numerator for basic and diluted
net income per share - net income $311,219 $205,700 $178,634
Denominator (in thousands):
Denominator for basic net income per share -
weighted-average common shares 108,147 108,161 108,011
Effect of dilutive securities -
employee stock-based awards (note 9) 971 869 891
Denominator for diluted net income per share -
adjusted weighted-average common shares 109,118 109,030 108,902
Basic net income per share $2.88 $1.90 $1.65
Diluted net income per share $2.85 $1.89 $1.64
Options to purchase 522,000, 555,000 and 565,000 shares of common stock at $54.54 per share were
outstanding during 2005, 2004 and 2003, respectively, but were not included in the computation of diluted earnings
per share because the options’ exercise price was greater than the average market price of the common shares and,
therefore, the effect was antidilutive.