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PART II
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
(All tables in millions, except per share data)
7. STOCK OPTIONS AND WARRANTS
The Company has various stock option plans
under which options to purchase shares of common stock may be
granted to key employees and directors of the Company. Options
granted under the plans are non-qualified and are granted at a
price equal to the quoted market price of the common stock on
the trading day immediately prior to the date of grant. Generally,
options granted will have a term of 10 years from the date of
grant, and will vest in increments of 25% per year over a four-year
period on the yearly anniversary of the grant date. In October
1998, the Company's Board of Directors approved the repricing
of approximately 32.1 million employee stock options to $12.75
per share, equal to the closing price of the Company's common
stock on the last business day prior to the date of the re-pricing.
Effective June 30, 2000, in conjunction with the tax-free spin-off
of ANC Rental, options to purchase approximately 2.8 million shares
of common stock held by employees of ANC Rental were canceled.
In addition, the Company's Board of Directors, in accordance with
the terms of the stock option plans, authorized the adjustment
of employee stock options to reflect the market effect on AutoNation's
common stock resulting from the spin-off. All other terms of the
existing options, including the vesting schedules, were unchanged.
A summary of stock option and warrant transactions
is as follows for the years ended December 31:
2000 1999 1998
---------------------- ---------------------- -------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- ----------- ---------- ----------- -------- ----------
Options and warrants outstanding at
beginning of period ................... 50.9 $ 15.84 54.6 $ 12.52 48.1 $ 15.67
Granted ................................. 12.5 6.91 17.0 15.80 16.9 21.89
Exercised ............................... (.6) 2.16 (7.8) 3.73 (9.3) 3.62
Canceled ................................ (10.2) 14.14 (12.9) 13.90 (1.1) 25.34
Spin-off adjustment ..................... 4.6 (1.57) -- -- -- --
------ --------- ------ -------- ----- --------
Options and warrants outstanding at end
of period ............................. 57.2 $ 12.74 50.9 $ 15.84 54.6 $ 12.52
====== ========= ====== ======== ===== ========
Options and warrants exercisable at end
of period ............................. 32.7 $ 14.59 15.4 $ 18.58 18.8 $ 11.27
Options available for future grants ..... 25.3 24.1 28.2
The following table summarizes information about
outstanding and exercisable stock options at December 31, 2000:
Outstanding Exercisable
-------------------------------------- ---------------------
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Exercise Price or Contractual Exercise Exercise
Range of Exercise Prices Shares Life (Yrs.) Price Shares Price
--------------------------- -------- ------------- ----------- -------- ----------
$1.02-$11.17 .......... 19.4 7.68 $ 8.35 6.7 $ 10.63
$11.51-$14.39 ......... 28.1 6.42 12.60 17.0 12.29
$14.56-$35.88 ......... 9.7 5.61 21.89 9.0 21.84
---- ---- -------- ---- --------
57.2 6.71 $ 12.74 32.7 $ 14.59
==== ==== ======== ==== ========
The Company applies Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" in accounting
for stock-based employee compensation arrangements whereby compensation
cost related to stock options is generally not recognized in determining
net income. Had compensation cost for the Company's stock option
plans been determined pursuant to SFAS No. 123, "Accounting for
Stock-Based Compensation", the Company's net income and earnings
per share would have decreased accordingly. Using the Black-Scholes
option pricing model for all options granted after December 31,
1994, the Company's pro forma net income, pro forma earnings per
share and pro forma weighted average fair value of options granted,
with related assumptions, are as follows for the years ended December
31:
2000 1999 1998
-------------- -------------- --------------
Pro forma net income ......................................... $ 285.4 $ 199.5 $ 368.5
Pro forma diluted earnings per share ......................... $ .79 $ .46 $ .81
Pro forma weighted average fair value of options granted ..... $ 2.96 $ 6.87 $ 13.87
Risk free interest rates ..................................... 5.07-5.15% 6.34-6.38% 4.76-4.82%
Expected dividend yield ...................................... -- -- --
Expected lives ............................................... 5-7 years 5-7 years 5-7 years
Expected volatility .......................................... 40% 40% 40%
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Form
10-K 
