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NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
(Dollar
amounts in thousands except per share data)
4.STOCK
OPTIONS
In
1995, the Company implemented a stock option plan for its non-employee members of its Board of Directors. In
April 2000, the Company’s Board of Directors approved a Restated Directors Plan (the "Restated
Plan") under which a total of 1,060,000 shares of common stock were reserved for issuance. The Restated
Plan was approved by shareholders at the 2000 Annual Meeting. Stock options granted under the Restated
Plan generally vest over a three year period and expire within ten years from the grant date.
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The
stock options are granted at a price equal to the fair market value of the Company’s common stock at the
date of grant. On
November 18, 1993, the Company reserved 5,300,000 shares of common stock for
issuance pursuant to the Company's 1993 Executive Stock Based Incentive Plan (the "Plan"). In
February 1998, the Company’s Board of Directors amended the Plan (the "Amendment") to increase
the number of shares of common stock authorized, thereunder, by 6,620,000 shares to 11,920,000 shares. The
Amendment was approved by shareholders at the 1998 Annual Meeting.
In
accordance with the Plan, the Company has issued stock options which vest over a three year period and expire no later than ten years from the grant date. These stock options have been
granted at fair market value at the date of grant.
A
summary of option activity in the Company’s stock option plans during the years ended February 3, 2001,
January 29, 2000 and January 30, 1999 is presented below.
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Y E A R E N D E D
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FEBRUARY 3, 2001
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JANUARY 29, 2000
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JANUARY 30, 1999
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NUMBER OF SHARES
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WEIGHT AVERAGE OPTION PRICE- PER SHARE
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NUMBER OF SHARES
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WEIGHT AVERAGE OPTION PRICE- PER SHARE
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NUMBER OF SHARES
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WEIGHT AVERAGE OPTION PRICE- PER SHARE
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Outstanding at beginning of year
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4,757,982
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$12.96
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5,203,024
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$12.58
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4,813,386
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$13.62
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Granted
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3,062,000
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19.64
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1,119,000
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12.82
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1,098,000
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8.14
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Exercised
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(2,380,110)
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14.12
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(1,372,856)
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11.51
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(219,732)
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10.33
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Forfeited
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(111,536)
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14.49
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(191,186)
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12.51
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(488,630)
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13.82
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Outstanding at end of year
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5,328,336
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$16.25
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4,757,982
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$12.96
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5,203,024
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$12.58
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Exercisable at end of year
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1,338,622
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$12.06
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2,795,136
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$14.07
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3,273,878
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$13.84
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The
following table summarizes information regarding stock options outstanding at February 3, 2001.
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OPTIONS OUTSTANDING
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OPTIONS EXERCISABLE
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RANGE OF EXERCISE PRICES
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NUMBER OF OPTION UNDER-
STANDING
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WEIGHTED AVERAGE REMAINING LIFE
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WEIGHTED AVERAGE EXERCISE PRICE
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NUMBER OF OPTION EXERCISABLE
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WEIGHTED AVERAGE EXERCISE PRICE
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$ 7.40 - $10.22
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547,688
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7.0 years
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$ 7.51
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291,673
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$ 7.44
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$10.23 - $15.33
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1,648,640
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7.2 years
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$12.84
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978,279
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$13.10
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$15.34 - $20.45
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2,971,674
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9.0 years
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$18.91
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67,337
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$16.79
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$20.46 - $25.56
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17,334
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8.7 years
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$23.27
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1,333
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$23.06
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$25.57 - $30.67
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107,000
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9.3 years
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$29.21
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-
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-
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$30.68 - $35.79
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16,000
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9.6 years
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$33.09
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-
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-
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$51.13
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20,000
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9.8 years
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$51.13
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-
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-
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Total
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5,328,336
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8.2 years
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$16.25
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1,338,622
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$12.06
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Under the
provisions of the Plan, the Company has issued to certain key management personnel shares of restricted stock. The purchase price of the restricted stock is $0.01 per share. The
difference between the market price of the shares on the date of grant and management's cost of $0.01 per share
is recorded as deferred compensation and is amortized over a five-year service period. Such shares are contingently
returnable, at the $0.01 par value, if the employee does not fulfill his or her service obligation.
A summary
of the changes in restricted shares outstanding for the years ended February 3, 2001, January 29, 2000 and January 30, 1999, is presented below.
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Y E A R E N D E D
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FEBRUARY 3, 2001
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JANUARY 29, 2000
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JANUARY 30, 1999
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NUMBER OF SHARES
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WEIGHT AVERAGE MARKET PRICE OF SHARE ON DATE OF GRANT
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NUMBER OF SHARES
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WEIGHT AVERAGE MARKET PRICE OF SHARE ON DATE OF GRANT
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NUMBER OF SHARES
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WEIGHT AVERAGE MARKET PRICE OF SHARE ON DATE OF GRANT
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|
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Outstanding at beginning of year
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433,600
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$ 7.91
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501,600
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$ 7.96
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113,066
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$10.04
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Granted
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-
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-
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-
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-
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513,000
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7.83
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Exercised
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-
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-
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-
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-
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(90,684)
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9.75
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Forfeited
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(23,400)
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7.40
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(68,000)
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8.30
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(33,782)
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8.13
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Outstanding at end of year
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410,200
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$ 7.93
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433,600
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$ 7.91
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501,600
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$ 7.96
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The
Company uses the intrinsic value method to measure compensation expense associated with grants of stock
options to employees. Had the Company used the fair value method to value compensation, as set forth in SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company’s net income and net income per
share would have been reported as follows:
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Y E A R E N D E D
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FEBRUARY 3, 2001
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JANUARY 29, 2000
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JANUARY 30, 1999
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Net income
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$ 106,819
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$ 54,911
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$ 33,058
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Net income per share – basic
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$ 1.73
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$ 0.89
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$ 0.52
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Net income per share – assuming dilution
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$ 1.67
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$ 0.87
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$ 0.52
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The
fair value of options on their grant date is measured using the Black/Scholes option pricing model. The
estimated weighted average fair value of options granted during fiscal 2000, 1999 and 1998 were $9.80, $6.56,
and $3.67 per option, respectively. Key assumptions used to apply this pricing model are as follows:
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Y E A R E N D E D
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FEBRUARY 3, 2001
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JANUARY 29, 2000
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JANUARY 30, 1999
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Weighted average risk free interest rate
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6.3%
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5.3%
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5.5%
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Weighted average expected life of option grants
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5.25 years
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6.50 years
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8.00 years
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Weighted average expected volatility of underlying stock
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54.0%
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56.3%
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47.4%
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Weighted average expected dividend payment rate, as a percentage of the stock price on the date of
grant
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1.4%
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1.9%
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2.8%
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The
option pricing model used was designed to value readily tradable stock options with relatively short
lives and no vesting restrictions. In addition, option valuation models require the input of highly
subjective assumptions including the expected price volatility. Because the options granted to
employees are not tradable, have contractual lives of ten years and changes in the subjective input
assumptions can materially affect the fair value estimate, in management’s opinion, the models do
not necessarily provide a reliable measure of fair value of the options issued under the Company’s
stock plans.
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