Ingram Micro 1999 Annual Report Download - page 49

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4477
Ingram Micro
Annual Report
Note 11 — Transactions with Related Parties
The Company has in the past leased warehouse or office space from certain of its shareowners, but no such leases remained in effect
at January 1, 2000 or January 2, 1999.Total rental payments to shareowners were $1,460 in 1998, and $1,645 in 1997, respectively.
Note 12 — Stock Options and Incentive Plans
The Company adopted the disclosure requirements of Statement of Financial Accounting Standards No. 123 (“FAS 123”) in
1996. As permitted by FAS 123, the Company continues to measure compensation cost in accordance with APB 25.Therefore, the
adoption of FAS 123 had no impact on the Company’s financial condition or results of operations. Had compensation cost for the
Company’s stock option plans been determined based on the fair value of the options consistent with the method of FAS 123, the
Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:
Fiscal Year
1999 1998 1997
Net Income As reported $183,419 $245,175 $193,640
Pro forma $152,789 $225,772 $182,977
Diluted earnings per share As reported $1.24 $1.64 $1.32
Pro forma $1.03 $1.51 $1.25
For pro forma disclosure, the fair value of compensatory stock options, restricted stock grants and stock purchase rights was
estimated using the Black-Scholes option pricing model using the following weighted average assumptions:
Fiscal Year
1999 1998 1997
Risk-free interest rate 5.45% 5.01% 6.39%
Expected years until exercise 2.7 years 4.0 years 4.0 years
Expected stock volatility 55.5% 57.4% 47.0%
Expected dividends — — —
Rollover Stock Option Plan
Certain of the Company’s employees participated in the qualified and non-qualified stock option and stock appreciation right
(“SAR”) plans of the Company’s former parent, Ingram Industries Inc. (“Industries”). In conjunction with the Company’s split-off
from Industries, Industries options and SARs held by the Company’s employees and certain other Industries options, SARs and
Incentive Stock Units (“ISUs”) were converted to or exchanged for Ingram Micro options (“Rollover Stock Options”).
Approximately 11.0 million Rollover Stock Options were outstanding immediately following the conversion.The majority of
the Rollover Stock Options will be fully vested by the year 2000 and no such options expire later than 10 years from the date of
grant. The Company recorded a non-cash compensation charge of approximately $1,978 ($1,400 net of tax) in 1999, $4,392
($3,659, net of tax) in 1998, and $6,876 ($5,915, net of tax) in 1997 related to the vested portion of the Rollover Stock Options.
1996 and 1998 Incentive Plans
The Company has two equity incentive plans (“the 1996 and 1998 Plans”), which provide for the granting of stock based
awards including incentive stock options, non-qualified stock options, restricted stock, and stock appreciation rights, among others,
to key employees and members of the Company’s Board of Directors. Under the two plans, the Company’s board of directors
authorized 27.0 million shares to be made available for granting.As of January 1, 2000, 13.8 million shares were available for
granting. Options granted under the 1996 and 1998 Plans were issued at exercise prices ranging from $7.00 to $53.56 per share