Garmin 2002 Annual Report Download - page 59

Download and view the complete annual report

Please find page 59 of the 2002 Garmin annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 76

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76

2000 Non-employee Directors’ Option Plan
Also in October 2000, the stockholders adopted a stock option plan for non-employee directors (the Directors Plan) providing for
grants of options for up to 50,000 common shares of the Company’s stock. The term of each award is ten years. All awards vest
evenly over a three-year period. During 2002 and 2001, options to purchase 5,058 and 5,325 shares were granted under this plan.
A summary of the Company’s stock option activity and related information under the Equity Incentive Plan and 2000 Non-
employee Directors’ Option Plan for the years ended December 28, 2002 and December 29, 2001 is provided below:
Weighted-Average
Exercise Price Number of Shares
(In Thousands)
Outstanding at December 30, 2000 $14.00 1,176
Granted 19.96 374
Exercised 14.00 (5)
Canceled 14.00 (10)
Outstanding at December 29, 2001 15.45 1,535
Granted
29.61 453
Exercised
14.15 (74)
Canceled
16.58 (40)
Outstanding at December 28, 2002
18.90 1,874
Outstanding options at December 30, 2000 were granted during 2000. No options were exercised or cancelled during 2000.
December 28, 2002 December 29, 2001 December 30, 2000
Weighted-average fair value of options granted during the year $11.42 $12.28 $8.53
The weighted-average remaining contract life for options outstanding at December 28, 2002 is approximately nine years. Options
outstanding at December 28, 2002 have exercise prices ranging from $14.00 to $29.79. At December 28, 2002, options to
purchase 520,156 shares are exercisable.
Pro forma information regarding net income and earnings per share is required by SFAS No. 123. SFAS No. 123 requires the pro
forma information be determined as if the Company has accounted for its employee stock options under the fair value method
of that statement. As described below, the fair value accounting provided under SFAS No. 123 requires the use of option
valuation models that were not developed for use in valuing employee stock options. The fair value for these options was
estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for
2002, 2001 and 2000: risk-free interest rate of 1.67%, 5.11%, and 5.75% respectively; no dividend yield; volatility factor of the
expected market price of the Company’s common stock of 0.3395, 0.591 and 0.530, respectively; and a weighted-average
expected life of the option of seven years.
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no
vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective
assumptions, including the expected stock price volatility. Because the Company’s employee stock options have characteristics
significantly different from those of traded options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
58