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FORM 10-K FOR FISCAL YEAR ENDED DECEMBER 31, 2001NOTES TO CONSOLIDATED FINANCIAL STATEMENTS6. Stockholders' Equity
Common Stock.
During the third quarter of 1999, we issued 4.6 million shares of common stock
at a price of $9.75 per share. Gross proceeds from this offering were
$44,850,000, with issuance costs of $2,888,690. In December 2000, the holders of approximately $100.0
million of our Convertible Notes converted such notes into 3,164,644 shares of
our common stock, which resulted in an increase in our common stock capital
accounts of approximately $97.4 million. Stock-Based Compensation Plans.
We have two current stock option plans, the 2001 Omnibus Stock Compensation
Plan, which was adopted by our board of directors in February 2001 and was
approved by shareholders at the 2001 Annual Meeting of Shareholders, and the
1990 non-qualified plan. In addition, we have an employee stock purchase plan.
No further grants will be made under the 1990 non-qualified plan. Under the 2001 plan, incentive stock options and other
options and awards may be granted to employees to purchase shares of common
stock. Under the 1990 non-qualified plan, non-employee members of our board of
directors may be granted options to purchase shares of common stock. Both
plans provide that the exercise prices equal 100% of the fair value of the
common stock on the date of grant. Unless otherwise provided, options become
exercisable for 20% of the shares on the first anniversary of the grant of the
option and are exercisable for an additional 20% per year thereafter. Options
granted expire 10 years after the date of grant or earlier in the event of the
optionee’s separation from employment. At the time the stock options are
exercised, the option price is credited to common stock and additional paid-in
capital. The employee stock purchase plan provides eligible
employees the opportunity to acquire shares of Swift common stock at a
discount through payroll deductions. The plan year is from June 1 to the
following May 31. The first year of the plan commenced June 1, 1993. To date,
employees have been allowed to authorize payroll deductions of up to 10% of
their base salary during the plan year by making an election to participate
prior to the start of a plan year. The purchase price for stock acquired under
the plan is 85% of the lower of the closing price of our common stock as
quoted on the New York Stock Exchange at the beginning or end of the plan year
or a date during the year chosen by the participant. Under this plan for the
last three years, we have issued 22,360 shares at a price of $21.41 in 2001,
29,889 shares at a price range of $8.40 to $10.57 in 2000, and 22,771 shares
at a price range of $5.21 to $11.00 in 1999. The estimated weighted average
fair value of shares issued under this plan, as determined using the Black-Scholes
option-pricing model, was $8.19 in 2001, $4.25 in 2000, and $4.74 in 1999. As
of December 31, 2001, 362,428 shares remained available for issuance under
this plan. There are no charges or credits to income in connection with this
plan. |
We account for our stock option plans under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." As all options were issued at a price equal to market price, no compensation expense has been recognized. Had compensation expense for these plans been determined based on the fair value of the options consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," our net income (loss) and earnings (loss) per share would have been adjusted to the following pro forma amounts:
| 2001 | 2000 | 1999 | ||||||
| ---------- | ---------- | ---------- | ||||||
| Net Income (Loss): | As Reported | $(22,347,765) | $59,184,008 | $19,286,574 | ||||
| Pro Forma | $(26,632,624) | $56,531,665 | $16,869,122 | |||||
| Basic EPS: | As Reported | $(0.90) | $2.79 | $1.07 | ||||
| Pro Forma | $(1.08) | $2.66 | $0.93 | |||||
| Diluted EPS: | As Reported | $(0.90) | $2.51 | $1.07 | ||||
| Pro Forma | $(1.08) | $2.40 | $0.93 |
Pro forma compensation cost reflected above may not be representative of the cost to be expected in future years.
The following is a summary of our stock options as of December 31, 2001, 2000, and 1999:
| 2001 | 2000 | 1999 | ||||||
| Wtd. Avg. | Wtd. Avg. | Wtd. Avg. | ||||||
| Shares | Exer. Price | Shares | Exer. Price | Shares | Exer. Price | |||
| Options outstanding, beginning of period | 2,076,593 | $11.70 | 2,148,511 | $9.08 | 2,266,146 | $9.03 | ||
| Options granted | 747,073 | $31.51 | 645,944 | $16.88 | 25,000 | $12.50 | ||
| Options canceled | (31,247) | $14.09 | (174,412) | $8.71 | (77,158) | $8.95 | ||
| Options exercised | (152,915) | $8.69 | (543,450) | $8.48 | (65,477) | $8.55 | ||
| ------------ | ------------- | ------------- | ||||||
| Options outstanding, end of period | 2,639,504 | $17.44 | 2,076,593 | $11.70 | 2,148,511 | $9.08 | ||
| ========= | ========= | ========= | ||||||
| Options exercisable, end of period | 1,181,141 | $11.49 | 897,711 | $9.35 | 1,280,156 | $8.87 | ||
| ========= | ========= | ========= | ||||||
| Options available for future grant, end of period | 1,155,057 | 181,235 | 950,735 | |||||
| ========= | ========= | ========= | ||||||
| Estimated weighted average fair value per share of options granted during the year | $20.68 | $10.90 | $7.10 | |||||
| ========= | ======== | ======== | ||||||
The fair value of each option grant, as opposed to its exercise price, is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions in 2001, 2000, and 1999, respectively: no dividend yield; expected volatility factors of 46.9%, 46.7%, and 44.2%; risk-free interest rates of 5.24%, 6.61%, and 5.60%; and expected lives of 7.3, 6.7, and 7.5 years. The following table summarizes information about stock options outstanding at December 31, 2001:
| Options Outstanding | Options Exercisable | ||||||
| Number | Wtd. Avg. | Number | |||||
| Range of | Outstanding | Remaining | Wtd. Avg. | Exercisable | Wtd. Avg. | ||
| Exercise Prices | at 12/31/01 | Contractual Life | Exercise Price | at 12/31/01 | Exercise Price | ||
| ------------ | ---------- | ------------ | ----------- | ----------- | ------------ | ||
| $5.00 to $16.99 | 1,592,597 | 5.7 | $9.50 | 1,012,907 | $ 9.20 | ||
| $17.00 to $28.99 | 280,439 | 6.1 | $23.25 | 153,785 | $24.23 | ||
| $29.00 to $41.00 | 766,468 | 9.1 | $31.84 | 14,449 | $36.69 | ||
| ---------- | ---------- | ||||||
| $5.00 to $41.00 | 2,639,504 | 6.8 | $17.44 | 1,181,141 | $11.49 | ||
| ======= | ======= | ||||||
to buy Swift stock. Benefits will be paid in a lump sum or installments, and the participants generally have the choice of receiving cash or stock. At December 31, 2001, 2000 and 1999, all of the ESOP compensation was earned.Employee Stock Ownership Plan. In 1996, we established an Employee Stock Ownership Plan ("ESOP") effective January 1, 1996. All employees over the age of 21 with one year of service are participants. This plan has a five-year cliff vesting, and service is recognized after the ESOP effective date. The ESOP is designed to enable our employees to accumulate stock ownership. While there will be no employee contributions, participants will receive an allocation of stock that has been contributed by Swift. Compensation expense is reported when such shares are released to employees. The plan may also acquire Swift common stock purchased at fair market value. The ESOP can borrow money from Swift
Employee Savings Plan. We have a savings plan under Section 401(k) of the Internal Revenue Code. Eligible employees may make voluntary contributions into the 401(k) savings plan with Swift contributing on behalf of the eligible employee an amount equal to 100% of the first 2% of compensation and 75% of the next 4% of compensation based on the contributions made by the eligible employees. Our contribution to the 401(k) savings plan totaled $558,000, $483,000, and $474,000 for the years ended December 31, 2001, 2000, and 1999, respectively. The contribution in 2001 was made all in common stock, while the 2000 and 1999 contributions were made half in common stock and half in cash. The shares of common stock contributed to the 401(k) savings plan totaled 28,798, 7,175, and 21,810 shares for the 2001, 2000, and 1999 contributions, respectively.
Common Stock Repurchase Program.
In March 1997, our board of directors approved a common stock repurchase program that terminated as of June 30, 1999. Under this program, we spent approximately $13.3 million to acquire 927,774 shares in the open market at an average cost of $14.34 per share. At December 31, 2001, 839,034 shares remain in treasury (net of 88,740 shares used to fund ESOP and 401(k) contributions) with a total cost of $12,032,791 and are included in "Treasury stock held, at cost" on the balance sheet.Shareholder Rights Plan.
In August 1997, the board of directors declared a dividend of one preferred share purchase right on each outstanding share of Swift common stock. The rights are not currently exercisable but would become exercisable if certain events occurred relating to any person or group acquiring or attempting to acquire 15% or more of our outstanding shares of common stock. Thereafter, upon certain triggers, each right not owned by an acquirer allows its holder to purchase Swift securities with a market value of two times the $150 exercise price.
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