Classmates.com 2003 Annual Report Download - page 52

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Stock-Based Compensation —The Company accounts for stock-based employee compensation arrangements in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees , Financial Accounting
Standards Board ("FASB") Interpretation No. ("FIN") 44, Accounting for Certain Transactions Involving Stock Compensation , and Emerging
Issues Task Force ("EITF") Issue No. 00-23, Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FIN
No. 44
and complies with the disclosure provisions
F-13
of SFAS No. 123, Accounting for Stock-Based Compensation and SFAS No. 148, Accounting for Stock-Based Compensation—Transition and
Disclosure, an amendment of FASB Statement No. 123
. Under APB Opinion No. 25, employee stock-based compensation expense is
recognized over the vesting period based on the difference, if any, on the date of grant, between the fair value of the Company's stock and the
exercise price. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and EITF Issue
No. 96
-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods
or Services . Compensation expense is recorded in accordance with FIN 28, Accounting for Stock Appreciation Rights and Other Variable
Stock Option or Award Plans, an interpretation of APB Opinions No. 15 and 25.
As required by SFAS No. 148, the following provides pro forma net income (loss) and pro forma net income (loss) per common share
disclosures for stock-based awards as if the fair-value-based method defined in SFAS No. 123 had been applied.
For each option granted up to and including September 23, 1999, the Company calculated the minimum fair value on the date of grant
using the minimum value option-pricing model as prescribed by SFAS No. 123. The fair value of the options granted subsequent to
September 23, 1999 has been estimated at the date of grant using the Black-Scholes option-pricing model, using the following weighted-
average assumptions: :
If the fair value based method had been applied in measuring stock-
based compensation expense, the pro forma effect on net income (loss)
and net income (loss) per share would have been as follows (in thousands, except per share amounts):
F
-
14
Year Ended June 30,
Six Months
Ended
December 31,
2003
2003
2002
2001
Risk
-
free interest rate
%
2
%
4
%
5
%
Expected life (in years)
5
5
5
Dividend yield
%
0
%
0
%
0
%
Volatility
107
%
110
%
110
%
120
%
Year Ended June 30,
Six Months Ended
December 31,
2003
2003
2002
2001
Net income (loss), as reported
$
33,327
$
27,792
$
(47,810
)
$
(205,756
)
Add: Stock-based charges included in net income
(loss)
—
107
6,417
19,287
Deduct: Total stock-based charges determined
under fair value-
based method for all awards, net of
tax
(12,510
)
(21,600
)
(34,302
)
(62,660
)
Pro forma net income (loss)
$
20,817
$
6,299
$
(75,695
)
$
(249,129
)
Net income (loss) per share
—
basic, as reported
$
0.52
$
0.45
$
(0.90
)
$
(6.03
)
Net income (loss) per share
—
basic, pro forma
$
0.32
$
0.10
$
(1.42
)
$
(7.30
)
Net income (loss) per share
—
diluted, as reported
$
0.48
$
0.41
$
(0.90
)
$
(6.03
)
Net income (loss) per share
—
diluted, pro forma
$
0.30
$
0.09
$
(1.42
)
$
(7.30
)