Electronic Arts 2000 Annual Report Download - page 54

Download and view the complete annual report

Please find page 54 of the 2000 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 72

  • 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
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72

Together with the Tracking Stock Proposal, the stockholders approved the Electronic Arts Inc. 2000 Class B Equity Incentive
Plan and the Electronic Arts Inc. 2000 Class A Equity Incentive Plan. The Class B equity plan allows the award of stock options
or restricted stock for up to an aggregate of 6,000,000 shares of Class B common stock and the Class A equity plan allows the
award of stock options and restricted stock for up to an aggregate of 3,100,000 shares of Class A common stock. Each includes
a provision for automatic option grants to the Company’s outside directors. As of March 31, 2000 there were no shares granted
under either plan.
Under the Company’s stock option plans, 122,563 and 69,009 shares were reissued from treasury stock in fiscal 2000 and
1999, respectively. No shares were distributed from reissued treasury stock in fiscal 1998.
The options generally expire ten years from the date of grant and are generally exercisable in monthly increments over 50
months. Certain options assumed in connection with the Maxis merger in fiscal 1998 expire ten years from the date of grant,
and vest and become exercisable at a rate of 25% on the first anniversary of the date of grant and 25% of the shares each
year thereafter.
Class B common stock grants will generally vest over 50 months with 2% vesting per month.
The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards No. 123,
“Accounting for Stock Based Compensation”
(“SFAS 123”). Accordingly, no compensation expense has been recognized for
options granted under the Company’s employee-based stock option plans. Had compensation expense been determined based
on the fair value at the grant dates for awards under those plans in accordance with the provisions of SFAS 123, the Company’s
pro forma net income and net income per share for fiscal 2000, 1999 and 1998 would have been:
2000 1999 1998
(In thousands, except per share data)
Net income
As reported $ 116,751 $ 72,872 $ 72,562
Pro forma $ 78,380 $ 45,886 $ 52,892
Earnings per share
As reported – basic $ 1.86 $ 1.20 $ 1.23
Pro forma – basic $ 1.26 $ 0.77 $ 0.91
As reported – diluted $ 1.76 $ 1.15 $ 1.19
Pro forma – diluted $ 1.19 $ 0.74 $ 0.88
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The fol-
lowing weighted-average assumptions are used for grants made in 2000, 1999 and 1998 under the stock plans: risk-free
interest rates of 4.93% to 6.54% in 2000; 4.39% to 5.55% in 1999; and 5.31% to 6.42% in 1998; expected volatility of 65% in
fiscal 2000, 59% in fiscal 1999 and 58% in fiscal 1998; expected lives of 2.29 years in fiscal 2000, 2.27 years in fiscal 1999 and
2.25 years in fiscal 1998 under the Option Plans and one year for the Employee Stock Purchase Plan. No dividends are
assumed in the expected term. The Company’s calculations are based on a multiple option valuation approach and forfeitures
are recognized when they occur. The above disclosures include options granted under the former Maxis option plans as if they
were initially granted by the Company.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
52