Sonic 2002 Annual Report Download - page 37

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Sonic 02 35
Notes to Consolidated Financial Statements
August 31, 2002, 2001 and 2000 (In thousands, except share data)
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 models do not necessarily
provide a reliable single measure of the fair value of its 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 was as follows for the years ended August 31:
2002 2001 2000
Pro forma net income $ 45,087 $ 37,197 $ 29,912
Pro forma net income per share-diluted $ 1.07 $ .89 $ .71
A summary of the company’s stock option activity (adjusted for the stock splits), and related information was as
follows for the years ended August 31:
2002 2001 2000
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
Outstanding – beginning of year 4,418,910 $ 10.00 4,666,239 $ 8.24 4,172,574 $ 7.13
Granted 538,853 27.35 825,720 17.13 850,221 13.18
Exercised (606,641) 7.95 (883,769) 6.60 (307,728) 6.22
Forfeited (167,925) 14.95 (189,280) 13.62 (48,828) 12.23
Outstanding – end of year 4,183,197 $ 12.33 4,418,910 $ 10.00 4,666,239 $ 8.24
Exercisable at end of year 2,986,886 $ 8.85 2,917,661 $ 7.41 3,065,510 $ 6.18
Weighted average fair value of
options granted during the year $ 12.94 $ 8.45 $ 6.11
A summary of the company’s options was as follows as of August 31, 2002:
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Number of Contractual Exercise Number of Exercise
Range of Exercise Prices Options Life (Yrs.) Price Options Price
$ 3.36 to $ 5.33 977,477 2.80 $ 4.75 977,477 $ 4.75
$ 5.70 to $ 9.56 896,896 4.67 7.37 896,896 7.37
$ 10.97 to $12.89 895,808 7.08 12.51 739,231 12.45
$ 13.58 to $20.99 944,184 8.43 16.80 373,282 15.99
$ 24.20 to $29.31 468,832 9.64 28.26 – –
$ 3.36 to $29.31 4,183,197 6.16 $ 12.33 2,986,886 $ 8.85