AutoZone 1999 Annual Report Download - page 29

Pro forma information is required by SFAS No. 123,
ÒAccounting for Stock-Based Compensation.Ó In accordance with
the provisions of SFAS No. 123, the Company applies APB
Opinion 25 and related interpretations in accounting for its stock
option plans and accordingly, no compensation expense for stock
options has been recognized. If the Company had elected to
recognize compensation cost based on the fair value of the
options granted at the grant date as prescribed in SFAS No. 123,
the CompanyÕs net income and earnings per share would have
been reduced to the pro forma amounts indicated below. The
effects of applying SFAS No. 123 and the results obtained through
the use of the Black-Scholes option pricing model in this pro
forma disclosure are not indicative of future amounts. SFAS No.
123 does not apply to awards prior to fiscal 1996.
Year Ended
August 28, August 29, August 30,
1999 1998 1997
Net Income ($000)
As reported $244,783 $227,903 $195,008
Pro forma $234,898 $221,803 $191,118
Basic earnings
per share
As reported $ 1.64 $ 1.50 $ 1.29
Pro forma $ 1.58 $ 1.46 $ 1.27
Diluted earnings
per share
As reported $ 1.63 $ 1.48 $ 1.28
Pro forma $ 1.57 $ 1.44 $ 1.26
The weighted-average fair value of the stock options
granted during fiscal 1999 was $12.74, during fiscal 1998 was
$12.17 and during fiscal 1997 was $9.26. The fair value of each
option granted is estimated on the date of the grant using the
Black-Scholes option pricing model with the following weighted-
average assumptions for grants in 1999, 1998 and 1997:
expected price volatility of .34 to .37; risk-free interest rates
ranging from 4.56 to 5.98 percent; and expected lives between
3.75 and 8.0 years.
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The following table summarizes information about stock options outstanding at August 28, 1999:
Options Outstanding Options Exercisable
Wtd. Avg. Wtd. Avg. Wtd. Avg.
Range of Exercise No. of Exercise Contractual No. of Exercise
Price Options Price Life (in years) Options Price
$ 1.09 Ð20.13 2,109,613 $14.20 4.90 974,678 $ 7.33
22.69 Ð25.13 2,573,857 24.65 6.71 395,904 25.10
25.25 Ð27.38 2,243,597 26.14 5.40 827,437 25.57
27.63 Ð31.50 2,345,583 29.30 8.16 179,514 28.71
32.56 Ð35.13 1,227,756 33.59 8.66 23,763 35.13
$ 1.09 Ð35.13 10,500,406 $24.95 6.62 2,401,296 $18.42
Options to purchase 2,401,296 shares at August 28, 1999, and 1,942,510 shares at August 29, 1998, were exercisable. Shares
reserved for future grants were 6,176,283 at August 28, 1999, and 2,699,468 at August 29, 1998.
The Company also has an employee stock purchase plan
under which all eligible employees may purchase common stock
at 85% of fair market value (determined quarterly) through
regular payroll deductions. Annual purchases are limited to
$4,000 per employee. Under the plan 268,554 shares were sold
in fiscal 1999 and 232,389 shares were sold in fiscal 1998. The
Company repurchased 210,525 shares in fiscal 1999 and 275,526
shares in fiscal 1998 for sale under the plan. A total of 1,299,057
shares of common stock is reserved for future issuance under
this plan.
During fiscal 1998, the Company adopted the 1998
Directors Stock Option Plan. Under the stock option plan, each
non-employee director was automatically granted an option to
purchase 1,000 shares of common stock on the planÕs adoption
date. Each non-employee director will receive additional options
to purchase 1,000 shares of common stock on January 1 of each
year. In addition, so long as the non-employee director owns
common stock valued at least equal to five times the value of the
annual fee paid to such director, that director will receive an
additional option to purchase 1,000 shares as of December 31 of
each year.
In March 1998, the Company adopted the Directors
Compensation Plan. Under this plan, a director may receive no
more than one-half of the annual and meeting fees immediately in
cash, and the remainder of the fees must be taken in either
common stock or the fees may be deferred in units with value
equivalent to the value of shares of common stock as of the grant
date (Òstock appreciation rightsÓ).