Note
13
STOCK INCENTIVE
PLANS
The Stock Incentive Plans for employees and affiliates
of the Company include the Steelcase Inc. Employee Stock Purchase
Plan (the “Purchase Plan”) and the Steelcase Inc. Incentive
Compensation Plan (the “Incentive Compensation Plan”).
Employee Stock Purchase Plan
The Company reserved a maximum of 1,500,000 shares
of Class A Common Stock for use under the Purchase Plan, which
is intended to qualify under Section 423 of the Internal Revenue
Code of 1986, as amended (the “Code”). Pursuant to the Purchase
Plan, each eligible employee, as of the start of any purchase
period, will be granted an option to purchase a designated
number of shares of Class A Common Stock. The purchase price
of shares of Class A Common Stock to participating employees
is designated by the Compensation Committee but in no event
shall be less than 85% of the lower of the fair market values
of such shares on the first and last trading days of the relevant
purchase period. However, no employee may purchase shares
under the Purchase Plan in any calendar year with an aggregate
fair market value (as determined on the first day of the relevant
purchase period) in excess of $25,000. The Board may at any
time amend or terminate the Purchase Plan.
The initial purchase period under the Purchase Plan
began on the date of the pricing of the Offerings in 1998
and ended on April 17, 1998. Eligible employees who wished
to participate in the Purchase Plan were allowed to purchase
by April 17, 1998 a maximum of 100 shares of Class A Common
Stock at 85% of the initial public offering price (the “Employee
Discount Option Grant”). The Company granted approximately
15,000 employees the option to participate in the Purchase
Plan during the initial purchase period, which resulted in
the issuance of 1,045,279 shares of Class A Common Stock and
the receipt by the Company of related proceeds approximating
$24.8 million.
Incentive Compensation Plan
The Company reserved for issuance under the Incentive
Compensation Plan a maximum of 150,000 shares of Class A Common
Stock for a special one-time grant on the date of the pricing
of the Offerings plus an additional 6,134,727 shares of Common
Stock. The Compensation Committee or its designee will have
full authority, subject to the provisions of the Incentive
Compensation Plan, to determine, among other things, the persons
to whom awards under the Incentive Compensation Plan (“Awards”)
will be made, the exercise price, vesting, size and type of
such Awards, and the specific performance goals, restrictions
on transfer and circumstances for forfeiture applicable to
Awards.
Awards may be made to employees and non-employee directors
of the Company or others as designated by the Compensation
Committee. A variety of Awards may be granted under the Incentive
Compensation Plan including stock options, stock appreciation
rights (“SARs”), restricted stock, performance shares, performance
units, cash-based awards, phantom shares and other share-based
awards as the Compensation Committee may determine. Stock
options granted under the Incentive Compensation Plan may
be either incentive stock options intended to qualify under
Section 422 of the Code or non-qualified stock options not
so intended. The Board may amend or terminate the Incentive
Compensation Plan.
In the event of a “change of control,” as defined in
the Incentive Compensation Plan, (i) all outstanding options
and SARs granted under the Incentive Compensation Plan will
become immediately exercisable and remain exercisable throughout
their entire term, (ii) any performance-based conditions imposed
with respect to outstanding Awards shall be deemed to be fully
earned and a pro rata portion of each such outstanding Award
granted for all outstanding performance periods shall become
payable in shares of Class A Common Stock, in the case of
Awards denominated in shares of Class A Common Stock, and
in cash, in the case of Awards denominated in cash, with the
remainder of such Award being canceled for no value and (iii)
all restrictions imposed on restricted stock that are not
performance-based shall lapse.
Concurrent with the Offerings in 1998, the Company
issued 10 shares of Class A Common Stock each to certain employees
of the Company and its subsidiaries as designated by the Compensation
Committee (the “Employee Stock Grant”). The Employee Stock
Grant included 149,540 shares of Class A Common Stock in the
aggregate and resulted in $4.2 million of compensation expense
which was recognized by the Company in 1998 upon issuance.
In addition, the Company issued options to purchase
shares of Class A Common Stock to certain employees and non-employee
directors of the Company, both in connection with and subsequent
to the Offerings in 1998. Information relating to the Company’s
stock options, which pursuant to APB Opinion No. 25 did not
result in any material compensation expense recognized by
the Company, is as follows:
![](images/tablebar.gif)
|
|
Number
of Shares
|
Weighted
Average
Option Price
Per Share
|
![](images/tablebar.gif) |
Unexercised
options outstanding- |
|
February 28, 1997 |
|
|
Options granted |
2,661,000
|
$
28.00
|
Options exercised |
|
|
Options
forfeited |
|
|
![](images/tablebar.gif) |
Unexercised
options outstanding- |
|
February 27, 1998 |
2,661,000
|
$
28.00
|
Options granted |
9,350
|
$
36.50
|
Options exercised |
|
|
Options
forfeited |
|
|
![](images/tablebar.gif) |
Unexercised
options outstanding- |
|
February 26, 1999 |
2,670,350
|
$
28.03
|
Options granted |
1,609,500
|
$
14.35
|
Options exercised |
|
|
Options
forfeited |
(202,250)
|
$
24.68
|
![](images/tablebar.gif) |
Unexercised
options outstanding- |
|
February 25, 2000 |
4,077,600
|
$
22.80
|
![](images/double_line.gif) |
|
Exercisable
options: |
|
|
February 27, 1998 |
|
|
February 26, 1999 |
289,100
|
$
28.00
|
February 25, 2000 |
579,135
|
$
28.01
|
![](images/double_line.gif) |
The
price per share of options outstanding ranged from $13.94 to $36.50 at February 25, 2000,
$28.00 to $36.50 at February 26, 1999 and $28.00 at February
27, 1998. As of February 25, 2000, there were 2,057,587 options
available for future issuances.
SFAS No. 123 Pro Forma Data
As discussed in Note 2, the Company accounts for its
Stock Incentive Plans in accordance with APB Opinion No. 25.
Accordingly, no compensation expense has been recognized for
the Employee Discount Option Grant or the Company’s employee
stock option grants. If the Company had recognized compensation
expense based upon the fair value of the Employee Discount
Option Grant and the Company’s employee stock option grants
at the date of grant and their respective vesting periods,
as prescribed by SFAS No. 123, the Company’s net income and
earnings per share would have been as follows:
(in
millions, except per share amounts)
|
![](images/tablebar.gif)
|
|
Feb 25, 2000
|
Feb
26, 1999
|
Feb
27, 1998
|
![](images/tablebar.gif) |
Pro forma
net income |
$
181.5
|
$
219.6
|
$
212.8
|
Pro forma
earnings per share
(basic and diluted) |
$
1.19
|
$
1.43
|
$
1.37
|
![](images/double_line.gif) |
The
estimated fair value of the Employee Discount Option Grant approximated the 15% discount discussed
above. The fair value of each option grant was estimated at
the date of the grant using the Black-Scholes option pricing
model with the following weighted average assumptions:
![](images/tablebar.gif)
|
|
Feb
25, 2000
|
Feb
26, 1999
|
Feb
27, 1998
|
|
Risk-free interest rate |
5.2%
|
5.6%
|
5.5%
|
Dividend yield |
3.1%
|
1.4%
|
1.4%
|
Volatility |
31.6%
|
32.4%
|
30.0%
|
Average expected
term (years) |
4.0
|
6.8
|
6.8
|
Fair value of
options granted |
$
3.59
|
$
14.16
|
$
10.60
|
|
|