O'Reilly Auto Parts 2002 Annual Report Download - page 46

NOTE 10— STOCK OPTION PLANS
The Company has a stock option plan under which incentive stock options or non-qualified stock options may be
granted to officers and key employees. An aggregate of 8,000,000 shares of common stock is reserved for future
issuance under this plan. The exercise price of options granted shall not be less than the fair market value of the stock
on the date of grant and the options will expire no later than 10 years from the date of grant. Options granted pursuant
to the plan become exercisable no sooner than six months from the date of grant. In the case of a shareholder owning
more than 10% of the outstanding stock of the Company, the exercise price of an incentive option may not be less than
110% of the fair market value of the stock on the date of grant. Also, the aggregate fair market value of the stock with
respect to which incentive stock options are exercisable for the first time by any individual in any calendar year may not
exceed $100,000. All grants under the plan since its inception have been non-qualified stock option grants. A summary
of outstanding stock options under this plan is as follows:
NUMBER
PRICE PER SHARE OF SHARES
Outstanding at December 31, 1999 $ 6.07 - 26.75 3,346,480
Granted 10.56 - 24.38 581,250
Exercised 6.07 - 22.75 (362,125)
Canceled 10.00 - 25.88 (206,625)
Outstanding at December 31, 2000 $ 8.00 - 26.75 3,358,980
Granted 14.37 - 37.62 1,279,000
Exercised 7.88 - 35.21 (1,012,695)
Canceled 8.00 - 34.30 (220,787)
Outstanding at December 31, 2001 $ 8.69 - 37.62 3,404,498
Granted 24.96 - 37.25 630,750
Exercised 8.69 - 26.75 (294,693)
Canceled 8.75 - 38.00 (206,075)
Outstanding at December 31, 2002 $ 8.94 - 37.62 3,532,565
Options to purchase 1,566,104, 1,250,261 and 1,729,033 shares of common stock were exercisable at
December 31, 2002, 2001 and 2000, respectively.
The Company also maintains a stock option plan for non-employee directors of the Company under which 300,000
shares of common stock are reserved for future issuance. All director stock options are granted at fair market value
on the date of grant and expire on the earlier of termination of service to the Company as a director or seven years.
Options granted under this plan become exercisable six months from the date of grant. A summary of outstanding stock
options under this plan is as follows:
NUMBER
PRICE PER SHARE OF SHARES
Outstanding at December 31, 1999 $ 6.56 - 23.91 90,000
Granted 12.44 20,000
Exercised 6.56 - 6.75 (20,000)
Outstanding at December 31, 2000 $ 9.09 - 23.91 90,000
Granted 20.65 30,000
Exercised 9.09 - 23.91 (70,000)
Outstanding at December 31, 2001 $12.44 - 23.91 50,000
Granted 29.02 30,000
Outstanding at December 31, 2002 $12.44 - 29.02 80,000
All options under this plan were exercisable at December 31, 2002, 2001 and 2000.
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.
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 2002, 2001 and 2000, respectively: risk-free interest rates of
4.01%, 5.16% and 5.02%; volatility factors of the expected market price of the Company’s common stock of .481,
.475 and .442; and weighted-average expected life of the options of 9, 9 and 8.9 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, 2002, 2001 and 2000 were $17.75, $16.52 and $9.24, respectively. The weighted-average
remaining contractual life at December 31, 2002, for all outstanding options under the Company’s stock option plans
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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