Napa Auto Parts 2002 Annual Report Download - page 37

35
Exercise prices for options outstanding as of December 31, 2002
ranged from approximately $21 to $35, except for 56,000 options
granted in connection with a 1998 acquisition for which the exer-
cise price is approximately $18. The weighted-average remaining
contractual life of those options is approximately 5 years.
In 1999, the Company entered into restricted stock agreements
with two officers which provide for the award of up to 150,000
and 75,000 shares, respectively, during the period 1999 through
2003 based on the Company achieving certain increases in net
income per common share and stock price levels. Through
December 31, 2002, the two officers have earned 15,000 and
7,500 shares, respectively. The Company recognizes compensa-
tion expense equal to the fair market value of the stock on the
award date over the remaining vesting period which expires in
2009.
8. Income Taxes
Deferred income taxes reflect the net tax effect of temporary
differences between the carrying amounts of assets and liabili-
ties for financial reporting purposes and amounts used for
income tax purposes. Significant components of the
Company’s deferred tax assets and liabilities are as follows:
(In Thousands) 2002 2001
Deferred tax assets related to:
Expenses not yet deducted for tax purposes $ 87,256 $117,745
Deferred tax liabilities related to:
Employee and retiree benefits 104,833 89,937
Inventory 52,000 33,591
Property and equipment 18,722 22,077
Other 10,333 6,848
185,888 152,453
Net deferred tax liability 98,632 34,708
Current portion of deferred tax liability (asset) 720 (26,277)
Non-current deferred tax liability $ 97,912 $60,985
The components of income tax expense are as follows:
(In Thousands) 2002 2001 2000
Current:
Federal $165,289 $188,040 $223,452
State 28,952 32,530 44,689
Deferred 43,995 (21,704) (6,714)
$238,236 $198,866 $261,427
The reasons for the difference between total tax expense and the
amount computed by applying the statutory Federal income tax
rate to income before income taxes and the cumulative effect of
an accounting change are as follows:
(In Thousands) 2002 2001 2000
Statutory rate applied to income
before the cumulative effect of
an accounting change $212,008 $173,605 $226,363
Plus state income taxes, net of
Federal tax benefit 23,081 19,064 28,322
Other 3,147 6,197 6,742
$238,236 $198,866 $261,427
A summary of the Company’s stock option activity and related information are as follows:
2002 2001 2000
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000’s) Price (000’s) Price (000’s) Price
Outstanding at beginning of year 6,156 $28 7,513 $26 5,388 $28
Granted 3,131 32 30 33 2,412 21
Exercised (1,412) 29 (1,049) 14 (8) 22
Forfeited (301) 34 (338) 32 (279) 27
Outstanding at end of year 7,574 $29 6,156 $28 7,513 $26
Exercisable at end of year 3,337 $28 4,477 $29 3,760 $28
Weighted-average fair value of options
granted during the year $5.72 $6.91 $ 2.71
Shares available for future grants 4,080 6,910 6,602