CarMax 2003 Annual Report Download - page 39

CARMAX 2003 37
(B) Restricted Stock
Prior to the separation, Circuit City Stores issued restricted
shares of CarMax Group Common Stock to key employees of
CarMax under the Circuit City Stores 1994 Stock Incentive
Plan. As a result of the separation, restricted shares of CarMax
Group Common Stock issued under the provisions of the
Circuit City Stores stock incentive plan were exchanged for
restricted shares of CarMax, Inc. common stock under the
CarMax, Inc. 2002 Stock Incentive Plan. In addition, Circuit
City Group restricted stock previously issued to CarMax
Group employees were converted and replaced by restricted
stock under the CarMax, Inc. stock incentive plans. Total
restricted stock awards of 25,984 shares were exchanged in
fiscal 2003. CarMax has issued restricted stock under the
provisions of the plan whereby management and key
employees of CarMax are granted restricted shares of CarMax,
Inc. common stock. Shares are awarded in the name of the
employee, who has all the rights of a shareholder, subject to
certain restrictions or forfeitures. Restrictions on the awards
generally expire three or four years from the date of grant.
The market value at the date of grant of all shares granted
has been recorded as unearned compensation and is a
component of equity. Unearned compensation is expensed
over the restriction periods.The total charge to operations was
$77,400 in fiscal 2003; $99,700 in fiscal 2002; and $153,500 in
fiscal 2001. As of February 28, 2003, 27,275 restricted shares
of CarMax, Inc. common stock were outstanding.
(C) Stock Incentive Plans
As a result of the separation, stock options issued to CarMax
Group employees under the provisions of the Circuit City
Stores stock incentive plan were replaced by stock options
under the CarMax, Inc. stock incentive plans. In addition,
Circuit City Group stock options previously issued to
CarMax Group employees were converted and replaced by
stock options under the CarMax, Inc. stock incentive plans.
Under these plans, nonqualified stock options may be granted
to management, key employees and outside directors of
CarMax to purchase shares of CarMax, Inc. common stock.
The exercise price for nonqualified options is equal to, or
greater than, the market value at the date of grant. Options
generally are exercisable over a period from one to eight years
from the date of grant. CarMax has authorized 10,100,000
shares of CarMax, Inc. common stock to be issued as either
options or restricted stock grants. Shares of CarMax, Inc.
common stock available for issuance of options or restricted
stock grants totaled 5,687,341 at February 28, 2003.
The company’s stock option activity is summarized in
Table 1 below.Table 2 summarizes information about stock
options outstanding as of February 28, 2003.
(D) Employee Stock Purchase Plan
The company has an employee stock purchase plan for all
CarMax employees meeting certain eligibility criteria. Under
the plan, eligible employees may, subject to certain limitations,
purchase shares of CarMax, Inc. common stock. For each $1.00
contributed by employees under the plan, the company matches
$0.15. Purchases are limited to 10% of an employee’s eligible
compensation, up to a maximum of $7,500 per year. Prior to the
separation, CarMax employees were authorized to purchase up
to 2,000,000 shares of CarMax Group Common Stock under
the plan for CarMax Group employees. Upon separation, the
former Circuit City plan for CarMax Group employees was
replaced by the 2002 CarMax, Inc. employee stock purchase
plan, which authorized CarMax, Inc. employees to purchase up
to 1,000,000 shares of CarMax, Inc. common stock.The source
of the shares available for purchase by employees may, at the
company’s option, be open market purchases or new issue.
TABLE 1 2003 2002 2001
Weighted Average Weighted Average Weighted Average
(Shares in thousands) Shares Exercise Price Shares Exercise Price Shares Exercise Price
Outstanding at beginning of year 3,631 $ 4.81 4,107 $3.16 3,324 $3.87
Granted 1,134 $26.22 1,659 $4.94 1,281 $1.70
Exercised (285) $ 5.06 (1,941) $1.32 (56) $0.22
Cancelled (135) $ 9.03 (194) $5.95 (442) $4.67
Outstanding at end of year 4,345 $10.25 3,631 $4.81 4,107 $3.16
Options exercisable at end of year 1,440 $ 6.08 821 $6.85 1,943 $2.94
TABLE 2 Options Outstanding Options Exercisable
Weighted Average
(Shares in thousands) Number Remaining Weighted Average Number Weighted Average
Range of Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
$ 1.63 835 4.0 $ 1.63 351 $ 1.63
$ 3.22 to $ 4.89 1,500 5.0 $ 4.82 344 $ 4.75
$ 6.06 to $ 9.06 712 3.2 $ 6.31 532 $ 6.40
$ 9.19 to $13.25 113 2.1 $10.70 107 $10.56
$14.00 to $20.00 154 4.1 $15.28 88 $15.27
$22.47 to $43.44 1,031 6.0 $27.03 18 $36.66
Total 4,345 4.6 $10.25 1,440 $ 6.08