Ingram Micro 2001 Annual Report Download - page 26

Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
In August 2001, the human resources committee of the Company’s board of directors authorized a modification of the exercise schedule
to retirees under the Equity Incentive Plans. The modification extended the exercise period upon retirement (as defined in the Equity
Incentive Plans) from 12 months to 60 months for outstanding options as of August 1, 2001 and for all options granted thereafter, but
not to exceed the contractual life of the option. Compensation expense, if any, will be recorded upon the retirement of eligible
employees and is calculated based on the excess of the fair value of the Company’s stock on the modification date ($14.28 per share) over
the exercise price of the modified option multiplied by the number of vested but unexercised options outstanding upon retirement. For
2001, a noncash compensation charge of $69 was recorded in the consolidated statement of income relating to this modification.
A summary of activity under the Company’s stock option plans is presented below:
Weighted Average
Shares (000s) Exercise Price
Outstanding at January 2, 1999 15,181 $ 14.85
Stock options granted during the year 7,833 18.45
Stock options exercised (1,674) 4.42
Forfeitures (2,297) 24.06
Outstanding at January 1, 2000 19,043 16.90
Stock options granted during the year 10,016 13.52
Stock options exercised (1,62 1) 6.4 1
Forfeitures (3,031) 19.01
Outstanding at December 30, 2000 24,407 1 5.93
Stock options granted during the year 7,412 15.2 1
Stock options exercised (2,630) 7.57
Forfeitures (2,887) 20.15
Outstanding at December 29, 2001 26,302 16.15
The following table summarizes information about stock options outstanding and exercisable at December 29, 2001.
Options Outstanding Options Exercisable
Number Weighted- Weighted- Number Weighted-
Outstanding Average Average Exercisable at Average
Range of Exercise Prices at 12/29/01 (000s) Remaining Life Exercise Price 12/29/01 (000s) Exercise Price
$0.68 - $ 3.32 957 0.7 $ 2.1 1 957 $ 2.1 1
$7.00 836 2.3 7.00 836 7.00
$10.63 -$17.4417,502 8.6 14.04 5,142 13.15
$18.00 - $ 27.00 4,463 3.819.614,133 19.33
$27.06 - $ 38.63 2,080 4.5 29.68 1,184 29.63
$41.69 - $ 53.56 464 4.9 47.28 315 47.20
26,302 16.15 12,567 16.34
Stock options exercisable totaled approximately 12,567,000; 10,933,000; and 7,260,000 at December 29, 2001, December 30, 2000, and
January 1, 2000, respectively, at weighted average exercise prices of $16.34, $15.38, and $13.42, respectively.
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Notes to Consolidated Financial Statements
(Dollars in 000s, except per share data)
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 and related interpretations. Therefore, the
adoption of FAS 123 had no impact on the Company’s consolidated 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 fair value method under
FAS 123, the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:
Fiscal Year 2001 2000 1999
Net Income (Loss) As reported $ 6,737 $ 226,173 $ 183,419
Pro forma $ (19,914) $ 183,117 $ 152,789
Diluted earnings per share As reported $ 0.04 $ 1.52 $ 1.24
Pro forma $ (0.1 3) $ 1.23 $ 1.03
The weighted average fair value per option granted in 2001, 2000, and 1999 was $6.66, $5.00, and $7.66, respectively. The fair value of options
was estimated using the Black-Scholes option-pricing model assuming no dividends and using the following weighted average assumptions:
Fiscal Year 2001 2000 1999
Risk-free interest rate 3.67% 6.30% 5.45%
Expected years until exercise 2.5 years 2.2 years 2.7 years
Expected stock volatility 68.3% 59.2% 55.5%
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. All Rollover Stock Options were fully vested by the year 2001 and no such
options expire later than 10 years from the date of grant.
Equity Incentive Plans
In 2001, the Company had three existing equity incentive plans, the 1996, 1998, and 2000 Equity Incentive Plans (collectively called “the
Equity Incentive Plans”) which provide for the grant 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 three plans, the Company’s board of directors authorized 47.0 million shares to be made available for grants. As of December 29, 2001,
approximately 15.6 million shares were available for grants. Options granted under the Equity Incentive Plans were issued at exercise
prices ranging from $7.00 to $53.56 per share and have expiration dates not longer than 10 years from the date of grant. The options
granted generally vest over a period of one to five-years. In October 1999, the Company granted a total of 272,250 shares of restricted
Class A Common Stock to certain executives under the 1998 Plan. These shares have no purchase price and vested ratably over a two-year
period. The Company recorded unearned compensation of $3,458 as a component of stockholders’ equity. The unearned compensation
was amortized and charged to operations over the vesting period. In 2001 and 2000, 1,500 and 38,000 shares, respectively, of the restricted
Class A Common Stock were forfeited. In July 2001, the Company also granted a total of 55,973 shares of restricted Class A Common Stock
to a board member and an executive under the 2000 Plan. These shares have no purchase price and vest ratably over a period of two to
three years. The Company recorded unearned compensation of $790 as a component of stockholders’ equity. The unearned
compensation is being amortized and charged to operations over the vesting period.
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