Electronic Arts 2007 Annual Report Download - page 167

stock, we transferred a portion of our consolidated assets, liabilities, revenue, expenses and cash flows to
EA.com Inc., a wholly-owned subsidiary of Electronic Arts.
In March 2003, we consolidated the operations of EA.com back into our core operations in order to increase
efficiency, simplify our reporting structure and more directly integrate our online activities into our core
console and PC business. As a result, we eliminated dual class reporting starting in fiscal 2004. The majority
of outstanding Class B options and warrants not directly held by us were acquired or converted to common
stock and warrants.
At our Annual Meeting of Stockholders, held on July 29, 2004, our stockholders approved an amendment and
restatement of our Certificate of Incorporation to (1) consolidate our Class A and Class B common stock into
a single class of common stock by reclassifying each outstanding share of Class A common stock as one share
of common stock and converting each outstanding share of Class B common stock into 0.001 share of
common stock, and (2) increase the authorized common stock from 500 million total shares of Class A and
Class B common stock combined to 1 billion shares of the newly consolidated single class of common stock.
(c) Share Repurchase Program
On October 18, 2004, our Board of Directors authorized a program to repurchase up to an aggregate of
$750 million of our common stock. We completed the repurchase program in September 2005. We repurchased
and retired the following (in millions):
Number of
Shares
Repurchased
and Retired Amount
From the inception of the program through March 31, 2005 ..................... 0.8 $ 41
Six months ended September 30, 2005 .................................... 12.6 709
From the inception of the program through September 30, 2005.................. 13.4 $750
(12) STOCK-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS
Adoption of SFAS No. 123(R)
In December 2004, the FASB issued SFAS No. 123 (revised 2004) (“SFAS No. 123(R)”), “Share-Based
Payment”. SFAS No. 123(R) requires that the cost resulting from all share-based payment transactions be
recognized in the financial statements using a fair-value-based method. In March 2005, the Securities and
Exchange Commission (“SEC”) released SAB No. 107, “Share-Based Payment”, which provides the views of
the SEC regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations for public
companies. SFAS No. 123(R) replaces SFAS No. 123, “Accounting for Stock-Based Compensation”, as
amended, supersedes APB No. 25, “Accounting for Stock Issued to Employees”, and amends SFAS No. 95,
“Statement of Cash Flows”.
We adopted SFAS No. 123(R) as of April 1, 2006 and have applied the provisions of SAB No. 107 to our
adoption of SFAS No. 123(R). SFAS No. 123(R) requires companies to estimate the fair value of share-based
payment awards on the date of grant using an option-pricing model. We elected to use the modified
prospective transition method of adoption which requires that compensation expense be recognized in the
financial statements for all awards granted after the date of adoption as well as for existing awards for which
the requisite service has not been rendered as of the date of adoption. Accordingly, prior periods are not
restated for the effect of SFAS No. 123(R).
Prior to April 1, 2006, we accounted for stock-based awards to employees using the intrinsic value method in
accordance with APB No. 25 and adopted the disclosure-only provisions of SFAS No. 123, as amended. Also,
as required by SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure”, we
provided pro forma net income (loss) and net income (loss) per share disclosures for stock-based awards as if
the fair-value-based method defined in SFAS No. 123 had been applied.
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