Circuit City 1997 Annual Report Download - page 25

THE 1995 LONG-TERM STOCK INCENTIVE PLAN - This plan allows the Company to issue from time to time qualified, non-qualified and
deferred compensation stock options, stock appreciation rights, restricted stock and restricted unit grants, performance unit grants and other
stock based awards authorized by the Compensation Committee of the Board of Directors. Options issued under this plan expire ten years after
the options are granted and generally become exercisable ratably on the third, fourth, and fifth anniversary of the grant date. A maximum total
number of 2.0 million shares may be granted under this plan of which a maximum of 800,000 shares may be of restricted stock and restricted
stock units. No award shall be granted under this plan after December 31, 2005. A total of 1,290,948 options were outstanding under this plan
as of December 31, 1997.
THE 1995 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS - This plan provides for automatic awards of non-
qualified options
to directors of the company who are not employees of the Company or its affiliates. All options granted under this plan will have a ten year
term from grant date and are immediately exercisable. A maximum of 100,000 shares may be granted for awards under this plan. This plan will
terminate the day following the tenth annual stockholders meeting. A total of 14,000 options were outstanding under this plan as of December
31, 1997.
The Company accounts for these plans in accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to
Employees", under which no compensation costs have been recognized for stock options. Had compensation costs of the plans been determined
under a fair value alternative method as stated in Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensations", the Company would have prepared a fair value model for such options and recorded such amount in the accompanying
consolidated financial statements as compensation expense. On a pro forma basis, net income for 1997 and 1996 would have been $37.7
million and $42.3 million respectively and diluted earnings per common share for 1997 and 1996 would have been $.99 and $1.11 respectively.
The Company arrived at the fair value of stock grant at the date of the grant by using the Black-Scholes pricing option model with the
following assumptions used for grants: risk-free interest rate of 6.2%; expected dividend rate of 0%; expected level of 3.75 years; and expected
volatility of 35%. The weighted average stock options at December 31, 1997 have a weighted average contractual level of 8 years. The
following table reflects the plan activity for year ended December 31, 1997:
The following table summarizes information for the three years ended December 31, 1997 concerning currently outstanding and exercisable
options:
Of the options issued during 1997, 420,348 options originally issued with exercise prices ranging from $24.38 to $49.13 were repriced on April
28, 1997 with an exercise price of $17.50, representing the market price of the outstanding common stock at that time.
All other terms of these options remained unchanged.
8. INCOME TAXES
OPTIONS
FOR SHARES OPTION PRICES
---------- -------------
Outstanding, January 1, 1997 1,206,500 $17.50 to $49.13
Granted during the year 604,146 $17.50 to $18.41
Cancelled during the year (505,698) $24.38 to $49.13
Exercised during the year - -
---------------- ---------------
Outstanding, December 31 1,304,948 $17.50 to $39.06
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1997 1996 1995
-------------------------- --------------------------- ----------------------
Weighted-Average Weighted Average Weighted Average
Fixed Options SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ -------------- ------ -------------- ------ --------------
Outstanding at beginning of year 1,206,500 $25.45 865,500 $ 20.49 - -
Granted .............................. 604,146 $19.19 365,150 $ 36.80 876,900 $20.45
Exercised ............................ - - - - - -
Cancelled ............................ (505,698) $33.90 (24,150) $ 19.39 (11,400) $17.50
-------- ------ ------- ------- ------- ------
Outstanding at end of year............1,304,948 $19.28 1,206,500 $ 25.45 865,500 $20.49
========== ====== ========= ======= ======= ======
Options exercisable at year end....... 189,000 139,000 10,000
Weighted average fair value per
option granted during the year..... $13.05 $13.57 $7.05
Range of Number Weighted-Average Weighted-Average Number Weighted-Average
Exercise Outstanding at Remaining Exercise Exercisable Exercise
PRICE 12/31/97 CONTRACTUAL LIFE PRICE AT 12/31/97 PRICE
-------------------- --------------- ------------------ --------------- ----------- -----------------
$ 17.50 to $ 22.50 1,070,948 8.11 $ 17.57 5,000 $ 21.56
$ 22.51 to $ 30.00 230,000 7.64 $ 26.88 180,000 $ 26.87
$ 30.01 to $ 39.06 4,000 8.33 $ 39.06 4,000 $39.06
$ 17.50 to $ 39.06 1,304,948 8.03 $ 19.28 189,000 $ 26.99
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