Aarons 1999 Annual Report Download - page 26

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Note G: Shareholders’ Equity
In February 1999, the Company’s Board of Directors
authorized the repurchase of up to 2,000,000 shares of the
Company’s Common Stock and/or Class A Common Stock.
During 1999, 859,500 shares of the Company’s common
shares were purchased at an aggregate cost of $12,673,000
and the Company was authorized to purchase an additional
1,612,190 shares at December 31, 1999. At December 31,
1999, the Company held a total of 3,710,211 common
shares in its treasury.
On April 28, 1998, the Company issued, through a
public offering, 2,100,000 shares of Common Stock. The
net proceeds to the Company after deducting underwriting
discounts and offering expenses were $39,958,000. The net
proceeds were used to reduce indebtedness and for general
business purposes.
The Company has 1,000,000 shares of preferred stock
authorized. The shares are issuable in series with terms for
each series fixed by the Board and such issuance is subject
to approval by the Board of Directors. No preferred shares
have been issued.
Note H: Stock Options
The Company has stock option plans under which
options to purchase shares of the Company’s Common
Stock are granted to certain key employees. Under the
plans, options granted become exercisable after a period
of two or three years and unexercised options lapse five
or ten years after the date of the grant. Options are subject
to forfeiture upon termination of service. Under the plans,
1,533,000 of the Company shares are reserved for issuance
at December 31, 1999. The weighted average fair value of
options granted was $9.55 in 1999, $9.26 in 1998, and
$8.58 in 1997.
Pro forma information regarding net earnings and earn-
ings per share is required by FAS 123, and has been deter-
mined as if the Company had accounted for its employee
stock options granted in 1999, 1998 and 1997 under the fair
value method. 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
1999, 1998 and 1997, respectively: risk-free interest rates of
6.36%, 5.36% and 5.88%; a dividend yield of .23%, .26%
and .25%; a volatility factor of the expected market price of
the Company’s Common Stock of .42, .43 and .39; and a
weighted average expected life of the option of 8 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.
For purposes of pro forma disclosures, the estimated
fair value of the options is amortized to expense over the
options’ vesting period. The Company’s pro forma infor-
mation follows:
(In Thousands Except Years Ended December 31,
Per Share) 1999 1998 1997
Pro Forma Net Earnings $24,424 $20,076 $17,508
Pro Forma Earnings Per Share 1.22 .99 .91
Pro Forma Earnings Per Share
Assuming Dilution 1.20 .97 .89
The table below summarizes option activity for the
periods indicated in the Company’s stock option plans.
Weighted
Average
Exercise
(In Thousands Except Per Share) Options Price
Outstanding at December 31, 1996 1,319 $ 8.48
Granted 322 15.95
Exercised (47) 5.28
Forfeited (9) 10.83
Outstanding at December 31, 1997 1,585 10.07
Granted 133 16.73
Exercised (235) 6.53
Forfeited (101) 15.47
Outstanding at December 31, 1998 1,382 10.92
Granted 230 16.74
Exercised (233) 7.91
Forfeited (77) 16.33
Outstanding at December 31, 1999 1,302 12.17
Exercisable at December 31, 1999 779 $ 9.38