harris corporation

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In January 1996, we completed the issuance of $100 million in aggregate principal amount of 7.0% Debentures
due January 15, 2026. The debentures are not redeemable prior to maturity.
NOTE 14: STOCK OPTIONS AND OTHER SHARE-BASED COMPENSATION
As of July 1, 2011, we had two shareholder-approved employee stock incentive plans (“SIPs”) under which
options or other share-based compensation was outstanding, and we had the following types of share-based awards
outstanding under our SIPs: stock options, performance share awards, performance share unit awards, restricted
stock awards and restricted stock unit awards. We believe that such awards more closely align the interests of
employees with those of shareholders. Certain share-based awards provide for accelerated vesting if there is a
change in control (as defined under our SIPs).
Summary of Share-Based Compensation Expense
The following table summarizes the amounts and classification of share-based compensation expense:
2011 2010 2009
(In millions)
Total expense ................................................ $46.1 $ 35.3 $ 39.3
Included in:
Cost of product sales and services ............................... $ 4.2 $ 3.9 $ 3.5
Engineering, selling and administrative expenses. .................... 41.9 31.4 35.8
Income from continuing operations. .............................. 46.1 35.3 39.3
Tax effect on share-based compensation expense ...................... (15.4) (11.7) (14.0)
Total share-based compensation expense after-tax ...................... $30.7 $ 23.6 $ 25.3
Compensation cost related to share-based compensation arrangements that was capitalized as part of inventory
or fixed assets in fiscal 2011, 2010 and 2009 was not material.
Shares of common stock remaining available for future issuance under our SIPs totaled 15,978,745 as of July 1,
2011. In fiscal 2011, we issued an aggregate of 984,187 shares of common stock under the terms of our SIPs, which
is net of shares withheld for tax purposes.
Stock Options
The following information relates to stock options that have been granted under shareholder-approved SIPs.
Option exercise prices are equal to or greater than the fair market value of our common stock on the date the
options are granted, using the closing stock price of our common stock. Options may be exercised for a period set at
the time of grant, which generally ranges from seven to ten years after the date of grant, and they generally become
exercisable in installments, which are typically 33.3 percent one year from the grant date, 33.3 percent two years
from the grant date and 33.3 percent three years from the grant date.
The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton optionpricing
model which uses assumptions noted in the following table. Expected volatility is based on implied volatility
from traded options on our common stock and the historical volatility of our stock price over the expected term of
the options. The expected term of the options is based on historical observations of our common stock over the past
ten years, considering average years to exercise for all options exercised, average years to cancellation for all
options cancelled and average years remaining for outstanding options, which is calculated based on the weightedaverage
vesting period plus the weighted-average of the difference between the vesting period and average years to
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