Napa Auto Parts 2003 Annual Report Download - page 31

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Approximate maturities under the Company’s credit facilities
are as follows (in thousands):
2004 $ 52,525
2005 108
2006 —
2007 —
2008 250,000
Subsequent to 2008 375,000
$677,633
5. SHAREHOLDERS’ EQUITY
The Company has a Shareholder Protection Rights
Agreement which includes the distribution of rights to
common shareholders under certain defined circumstances.
The rights entitle the holder, upon occurrence of certain
events, to purchase additional stock of the Company. The
rights will be exercisable only if a person, group or company
acquires 20% or more of the Company’s common stock or
commences a tender offer that would result in ownership
of 20% or more of the common stock. The Company is
entitled to redeem each right for one cent.
6. LEASED PROPERTIES
The Company leases land, buildings and equipment. Certain
land and building leases have renewal options generally
for periods ranging from two to ten years. In addition,
certain properties occupied under operating leases contain
normal purchase options. The Company also has an
$85,000,000 construction and lease facility. Properties
acquired by the lessor are constructed and/or then leased
to the Company under operating lease agreements. The
total amount advanced and outstanding under this facility
at December 31, 2003 was approximately $80,057,000.
Since the resulting leases are accounted for as operating
leases, no debt obligation is recorded on the Company’s
balance sheet. Future minimum payments, by year and in
the aggregate, under the noncancelable operating leases
with initial or remaining terms of one year or more consisted
of the following at December 31, 2003 (in thousands):
2004 $ 104,862
2005 80,027
2006 56,907
2007 41,801
2008 27,920
Subsequent to 2008 71,818
$ 383,335
Rental expense for operating leases was approximately
$119,595,000 in 2003, $114,352,000 in 2002 and
$112,470,000 in 2001.
7. STOCK OPTIONS AND RESTRICTED STOCK AWARDS
In 1999, the Company authorized the grant of options of
up to 9,000,000 shares of common stock. In accordance
with stock option plans approved by shareholders, options
are granted to key personnel for the purchase of the
Company’s stock at prices not less than the fair market
value of the shares on the dates of grant. Most options
may be exercised not earlier than twelve months nor later
than ten years from the date of grant.
Pro forma information regarding net income and earnings
per share is required by SFAS 123, as amended, determined
as if the Company had accounted for its employee stock
options granted subsequent to December 31, 1994 under
the fair value method of SFAS 123. 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 2003, 2002 and 2001, respectively:
risk-free interest rates of 4.0%, 4.1%, and 5.0%; dividend
yield of 3.6%; 4.0%, and 3.8%; annual volatility factor of
the expected market price of the Company’s common stock
of 0.25, 0.22, and 0.26, and an expected life of the options
of 8 years, 8 years, and 5 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 sub-
jective 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 under SFAS 123 as
amended by SFAS No. 148, the estimated fair value of the
options is amortized to expense over the options’ vesting
period. The following table illustrates the effect on net
income and earnings per share if the fair value based
method had been applied to all outstanding and unvested
awards in each period (in thousands, except per share
amounts):
Year ended December 31, 2003 2002 2001
Net income (loss), as reported $334,101 $(27,590) $ 297,147
Add: Stock-based employee
compensation expense related to
option grants in 2003 included in
reported net income, net of related
tax effects 13 ——
Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (5,688) (3,376) (3,394)
Pro forma net income (loss) $328,426 $(30,966) $ 293,753
Income (loss) per share:
Basic—as reported $1.92$(0.16) $ 1.72
Basic—pro forma $1.89$(0.18) $ 1.70
Diluted—as reported $1.91$(0.16) $ 1.71
Diluted—pro forma $1.88$(0.18) $ 1.69