O'Reilly Auto Parts 2001 Annual Report Download - page 32

O’REILLY AUTOMOTIVE 2001 ANNUAL REPORT
A MODEL YEAR
Page 30
a director or seven years. Options granted under this plan become
exercisable six months from the date of grant. A summary of out-
standing stock options is as follows:
NUMBER
PRICE PER SHARE OF SHARES
Outstanding at December 31, 1998 $ 6.56 - 13.50 70,000
Granted 23.91 20,000
Exercised – –
Canceled – –
Outstanding at December 31, 1999 $ 6.56 - 23.91 90,000
Granted 12.44 20,000
Exercised 6.56 - 6.75 (20,000)
Canceled – –
Outstanding at December 31, 2000 $ 9.09 - 23.91 90,000
Granted 20.65 30,000
Exercised 9.09 - 23.91 (70,000)
Canceled – –
Outstanding at December 31, 2001 $12.44 -23.91 50,000
All options under this plan were exercisable at December 31,
2001, 2000 and 1999.
Pro forma information regarding net income and earnings per
share is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee and non-employee director
stock options under the fair value method of that SFAS.
The fair values for these options were estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2001, 2000 and 1999, respectively:
risk-free interest rates of 5.16%, 5.02% and 6.54%; volatility factors
of the expected market price of the Company’s common stock of
.475, .442 and .247; and weighted-average expected life of the options
of 9, 8.9 and 8.0 years. The Company assumed a 0% dividend yield
over the expected life of the options. The weighted-average fair
values of options granted during the years ended December 31, 2001,
2000 and 1999, were $16.52, $9.24 and $10.22, respectively. The
weighted-average remaining contractual life at December 31, 2001,
for all outstanding options under the Company’s stock option plans is
7.346 years. The weighted-average exercise price for all outstanding
options under the Company’s stock option plans was $20.63, $16.12
and $16.15 at December 31, 2001, 2000 and 1999, respectively.
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
stock options have characteristics significantly different from those
of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in
management’s opinion, the existing model does not necessarily
provide a reliable single measure of the fair value of its employee
stock options.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options’
vesting period. The Company’s pro forma information follows:
(In thousands, except per share data)
2001 2000 1999
Pro forma net income $60,946 $48,177 $43,501
Pro forma basic net income per share $1.17 $0.94 $ 0.89
Pro forma net income per share –
assuming dilution $1.15 $0.93 $ 0.88
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)