Electronic Arts 1999 Annual Report Download - page 31

Download and view the complete annual report

Please find page 31 of the 1999 Electronic Arts annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 49

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49

NOTE 1 (CONTINUED)
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions
denominated in currencies other than the functional currency. Included in interest and other income in the statements
of income are foreign currency transaction losses of $1,168,000, $517,000 and $1,024,000, for the fiscal years ended
March 31, 1999, 1998 and 1997, respectively.
(l) Net Income Per Share
The following summarizes the computations of Basic Earnings Per Share (“EPS”) and Diluted EPS. Basic EPS is computed
as net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable through stock-based compensation plans
including stock options, restricted stock awards, warrants and other convertible securities using the treasury stock method.
(In thousands, except per share amounts)
Years ended March 31, 1999 1998 1997
Net income $ 72,872 $ 72,562 $ 51,327
Shares used to compute
net income per share:
Weighted-average common shares 60,748 58,867 57,544
Dilutive stock options 2,524 2,091 2,013
Dilutive potential common shares 63,272 60,958 59,557
Net income per share:
Basic $ 1.20 $ 1.23 $ 0.89
Diluted $ 1.15 $ 1.19 $ 0.86
Excluded from the above computation of weighted-average shares for diluted EPS for the fiscal years ended March 31,
1999, 1998 and 1997 were options to purchase 645,000, 137,000 and 623,000 shares of common stock, respectively, as
the options’ exercise price was greater than the average market price of the common shares. For the fiscal year ended
March 31, 1999, the weighted-average exercise price of the respective options was $47.33.
(m) Employee Benefits
The Company has a 401(k) Plan covering substantially all of its U.S. employees. The 401(k) Plan permits the Company to
make discretionary contributions to employees’ accounts based on the Company’s financial performance. The Company
contributed $2,092,000, $902,000 and $925,000 to the Plan in fiscal 1999, fiscal 1998 and fiscal 1997, respectively.
(n) Stock-based Compensation
The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”).
(o) Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards
No. 133 (“SFAS 133”) “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS 133 is effective as of the beginning of the
first quarter of the fiscal year beginning after June 15, 2000. The Company is determining the effect of SFAS 133 on its
financial statements.