85
PFSWEB
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
purpose of the Plans is to benefit and advance the interests of Daisytek by
rewarding officers and certain key employees for their contributions to the
financial success of Daisytek and thereby motivating them to continue to make
such contributions in the future. The Plans provide for fixed grants of both
incentive stock options and nonqualified stock options. The stock options
generally vest over a three to five year period from the date of grant and
expire 10 years after the date of grant.
The Company has adopted the disclosure-only provisions of SFAS 123,
"Accounting for Stock-Based Compensation." In accordance with the provisions of
SFAS 123, the Company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for the Plans and accordingly, does not recognize compensation
expense for its stock option plans because Daisytek typically does not issue
options at exercise prices below the market value at date of grant. Had
compensation expense for Daisytek's stock option plans applicable to the
Company's employees been determined based upon the fair value at the grant date
for awards consistent with the methodology prescribed by SFAS 123, the Company's
combined pretax income would have decreased by $943,000, $787,000 and $2,531,000
in fiscal years ended March 31, 1997, 1998 and 1999, respectively. These pro
forma effects may not be representative of expense in future periods since the
estimated fair value of stock options on the date of grant is amortized to
expense over the vesting period. Additional options may be granted in future
years. Options issued prior to April 1, 1995 were excluded from the computation.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions used for
grants in fiscal year 1997: no dividends, expected volatility ranging between
39.25% and 39.50%; risk-free interest rate ranging between 5.9% and 6.6%; and
expected life of 6 years. The following assumptions were used for grants during
the fiscal year 1998: no dividends, expected volatility ranging between 40.97%
and 41.40%; risk-free interest rate ranging between 5.6% and 6.8%; and expected
life of 6 years. The following assumptions were used for grants during the
fiscal year 1999: no dividends, expected volatility ranging between 41.42% and
47.92%; risk-free interest rate ranging between 4.6% and 5.5%; and expected life
of 6 years.
The following table summarizes stock option activity under various Daisytek
plans as it relates to PFSweb employees:
WEIGHTED AVERAGE
SHARES PRICE PER SHARE EXERCISE PRICE
--------- --------------- ----------------
Outstanding, March 31, 1996....................... 561,470 $ 0.64 - $ 9.75 $ 4.88
Granted......................................... 275,266 $15.50 - $16.25 $16.11
Exercised....................................... (34,052) $ 2.65 - $ 9.75 $ 5.16
Canceled........................................ -- $ -- - $ -- $ --
---------
Outstanding, March 31, 1997....................... 802,684 $ 0.64 - $16.25 $ 8.72
Granted......................................... 570,370 $12.50 - $19.63 $12.87
Exercised....................................... (252,436) $ 0.64 - $ 9.75 $ 2.47
Canceled........................................ (296,442) $ 9.75 - $16.25 $15.80
---------
Outstanding, March 31, 1998....................... 824,176 $ 0.64 - $19.63 $10.96
Granted......................................... 1,807,886 $12.88 - $22.88 $15.13
Exercised....................................... (108,832) $ 0.64 - $12.50 $ 3.41
Canceled........................................ (146,739) $ 9.75 - $22.88 $16.05
---------
Outstanding, March 31, 1999....................... 2,376,491 $ 2.65 - $22.88 $14.16
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