Electronic Arts 2007 Annual Report Download - page 173

Information related to stock issuances under the ESPP are as follows:
2007 2006 2005
Year Ended March 31,
Number of shares issued (in thousands) ........ 705 625 624
Exercise prices for purchase rights ............ $43.04 to $43.10 $42.31 to $47.95 $38.14 to $51.35
Estimated weighted-average fair value of purchase
rights ................................ $16.51 $15.42 $13.96
We issue new common stock out of the ESPP’s pool of authorized shares. The fair value above was estimated
on the date of grant using the Black-Scholes option-pricing model assumptions described in this note under
the headings “Adoption of SFAS No. 123(R)” and “Pre-SFAS No. 123(R) Pro Forma Accounting Disclosures”.
Pre-SFAS No. 123(R) Pro Forma Accounting Disclosures
Prior to the adoption of SFAS No. 123(R), 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.
Had compensation cost for our stock-based compensation plans been measured based on the estimated fair
value at the grant dates in accordance with the provisions of SFAS No. 123, as amended, we estimate that our
reported net income and net income per share would have been the pro forma amounts indicated below. 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 were used for grants made under our stock-based compensation
plans in fiscal 2006 and 2005:
2006 2005
Year Ended
March 31,
Risk-free interest rate ...................................................... 4.3% 3.5%
Expected volatility......................................................... 33% 36%
Expected term of stock options (in years) ........................................ 3.2 3.3
Expected term of employee stock purchase plan (in months).......................... 6 6
Expected dividends ........................................................ None None
Our calculations were based on a multiple-award valuation method and forfeitures were recognized when they
occurred.
(In millions, except per share data) 2006 2005
Year Ended
March 31,
Net income:
As reported ............................................................ $236 $504
Deduct: Total stock-based employee compensation expense determined under fair-value-
based method for all awards, net of related tax effects .......................... (85) (83)
Add: Stock-based employee compensation expense included in reported net income, net of
related tax effects ..................................................... 2 4
Pro forma ............................................................. $153 $425
Net income per share:
As reported — basic ..................................................... $0.78 $1.65
Pro forma — basic ...................................................... $0.50 $1.39
As reported — diluted .................................................... $0.75 $1.59
Pro forma — diluted ..................................................... $0.49 $1.35
Annual Report
99