Avnet 2001 Annual Report Download - page 55

53
Avnet, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
53
Employee stock purchase plan
In October 1995, the Company implemented the Avnet Employee
Stock Purchase Plan (“ESPP”). Under the terms of the ESPP,
eligible employees of the Company are offered options to purchase
shares of Avnet common stock at a price equal to 85% of the fair
market value on the first or last day, whichever is lower, of each
monthly offering period. A total of 1,000,000 shares of Avnet
common stock were initially reserved for sale under the ESPP, and
in November 1998 an additional 1,000,000 shares were reserved. At
June 29, 2001, employees had purchased 1,862,544 shares and 137,456
shares were still available for purchase under the ESPP.
Incentive stock
The Company has an Incentive Stock Program wherein a total of
273,970 shares were still available for award at June 29, 2001 based
upon operating achievements. Delivery of incentive shares is spread
equally over a four-year period and is subject to the employee’s
continuance in the Company’s employ. As of June 29, 2001, 116,068
shares previously awarded have not yet been delivered. The
program will terminate on December 31, 2004.
At June 29, 2001, there were 14,487,522 common shares reserved for
stock options (including the ESPP) and incentive stock programs.
Pro forma information
The Company follows Accounting Principles Board Opinion 25
(“APB 25”), “Accounting for Stock Issued to Employees,” in
accounting for its stock-based compensation plans. In applying
APB 25, no expense was recognized for options granted under the
various stock option plans (except in the rare circumstances where
the exercise price was less than the fair market value on the date of
the grant) nor was expense recognized in connection with shares
purchased by employees under the ESPP. Statement of Financial
Accounting Standards No. 123 (“SFAS 123”), “Accounting for
Stock-Based Compensation,” requires disclosure of pro forma net
income as if a fair value-based method of measuring stock-based
compensation had been applied. Reported and pro forma net
income and diluted earnings per share are as follows:
June 29, June 30, July 2,
Years Ended 2001 2000 1999
(In thousands, except per share amounts)
Net income:
As reported $15,402 $163,392 $174,639
Pro forma 6,950 153,805 164,909
Diluted earnings
per share:
As reported $ 0.13 $ 1.51 $ 1.80
Pro forma 0.06 1.42 1.71
The fair value of the stock options granted is estimated on the
date of grant using the Black-Scholes option pricing model. The
weighted average assumptions used and the weighted average
estimated fair value of an option granted are as follows:
June 29, June 30, July 2,
Years Ended 2001 2000 1999
Expected life (years) 5.5 4.9 5.6
Risk-free interest rate 6.0% 5.7% 4.6%
Volatility 37.0% 33.0% 24.0%
Dividend yield 1.1% 1.7% 1.8%
Weighted average
fair value $11.33 $8.05 $4.71
In February 2000, the Company issued five-year warrants at the
exercise price of $26.22 for the purchase of 261,000 shares of the
Company’s common stock in conjunction with the award from a
customer of a three-year manufacturing contract. As of the effective
date of the sale of K*TEC, the warrants were immediately vested.
The estimated fair value of the warrants was recorded in additional
paid-in capital and the related expense was recorded against the
gain on the sale of K*TEC.
13. CONTINGENT LIABILITIES
From time to time, the Company may become liable with respect
to pending and threatened litigation, taxes and environmental and
other matters. The Company has been designated a potentially
responsible party or has had other claims made against it in
connection with environmental clean-ups at several sites. Based
upon the information known to date, the Company believes that
it has appropriately reserved for its share of the costs of the clean-ups
and it is not anticipated that any contingent matters will have a
material adverse impact on the Company’s financial condition,
liquidity or results of operations.