Electronic Arts 2002 Annual Report Download - page 60

(b) Stock Option Plans
The Company’s 2000 Class A Equity Incentive Plan, 1995 Stock Option Plan, and Directors’ Plan (“Option
Plans”) provide options for employees, officers and directors to purchase the Company’s Class A common
stock. Pursuant to these Option Plans, the Board of Directors may grant non-qualified and incentive stock
options to employees and officers and non-qualified options to directors, at not less than the fair market
value on the date of grant.
At the Company’s Annual Meeting of Stockholders, held on August 1, 2001, the stockholders elected
to amend the 2000 Class A Equity Incentive Plan to increase by 6,000,000 the number of shares of the
Company’s Class A common stock reserved for issuance under the Plan.
Under the Company’s stock option plans, 246,000 shares were reissued from treasury stock in fiscal
2000. No shares were distributed from reissued treasury stock in fiscal 2002 or 2001.
Together with the Tracking Stock Proposal, the stockholders approved the Electronic Arts Inc. 2000
Class B 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.The Class B plan includes a provision
for automatic option grants to the Company’s outside directors. As of March 31, 2002 there were 225,000
restricted shares issued under the Class B equity plan.
The options generally expire ten years from the date of grant and are generally exercisable in monthly
increments over 50 months. Class B common stock grants will generally vest over 50 months with 2% vest-
ing per month.
In the fiscal year 2001, the Board of Directors approved the Key Partner Class B Equity Incentive
Program which allows for the issuance of warrants to key business partners to purchase up to 750,000
shares of Class B common stock. As of March 31, 2002, there were 121,000 warrants outstanding under
this program.These warrants expire not later than five years from issuance.
The Company has adopted the disclosure-only provisions of SFAS 123, “Accounting for Stock Based
Compensation”
.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 (loss) and net income (loss) per share for fiscal 2002, 2001 and 2000
would have been:
(In thousands, except per share data) 2002 2001 2000
CONSOLIDATED
Net income (loss):
As reported $101,509 $(11,082) $ 116,751
Pro forma $27,913 $(69,350) $ 78,380
Earnings per share:
As reported – basic N/A N/A $ 0.93
Pro forma – basic N/A N/A $ 0.62
As reported – diluted N/A N/A $ 0.88
Pro forma – diluted N/A N/A $ 0.60
CLASS A COMMON STOCK
Net income (loss):
As reported – basic $124,256 $11,944 N/A
Pro forma – basic $51,505 $(45,493) N/A
As reported – diluted $101,509 $(11,082) N/A
Pro forma – diluted $27,913 $(69,350) N/A
Earnings (loss) per share:
As reported – basic $0.91 $0.09 N/A
Pro forma – basic $0.38 $(0.35) N/A
As reported – diluted $0.71 $(0.08) N/A
Pro forma – diluted $0.20 $(0.53) N/A
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model.The following weighted-average assumptions are used for grants made in 2002, 2001 and 2000
under the stock plans: risk-free interest rates of 2.22% to 4.51% in 2002; 4.59% to 6.55% in 2001; and
4.93% to 6.54% in 2000; expected volatility of 72% in fiscal 2002, 74% in fiscal 2001 and 65% in fiscal
2000; expected lives of 2.25 years in fiscal 2002, 2.32 years in fiscal 2001 and 2.29 years in fiscal 2000
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 for-
feitures are recognized when they occur.
EA 2002 AR
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