Dish Network 1997 Annual Report Download - page 74

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
9. Stock Compensation Plans – Continued
F–27
On July 1, 1997, the Board of Directors approved a repricing of substantially all outstanding options with an
exercise price greater than $17.00 per share of Class A Common Stock to $17.00 per share. The Board of Directors
would not typically consider reducing the exercise price of previously granted options. However, these options were
repriced due to the occurrence of certain events beyond the reasonable control of the employees of EchoStar which
significantly reduced the incentive these options were intended to create. The fair market value of the Class A
Common Stock was $15.25 on the date of the repricing. Options to purchase approximately 256,000 shares of Class A
Common Stock were affected by this repricing.
Accounting for Stock-Based Compensation
EchoStar has elected to follow Accounting Principles Board Opinion No. 25, “ Accounting for Stock Issued to
Employees,” (“ APB 25” ) and related interpretations in accounting for its stock-based compensation plans. Under APB
25, because the exercise price of EchoStar’s employee stock options is equal to the market price of the underlying stock
on the date of the grant, no compensation expense is recognized. In October 1995, the FASB issued FAS No. 123,
“ Accounting and Disclosure of Stock-Based Compensation,” (“ FAS No. 123” ) which established an alternative method
of expense recognition for stock-based compensation awards to employees based on fair values. EchoStar elected to
not adopt FAS No. 123 for expense recognition purposes.
Pro forma information regarding net income and earnings per share is required by FAS No. 123 and has been
determined as if EchoStar had accounted for its stock-based compensation plans using the fair value method prescribed
by that statement. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to
expense over the options’ vesting period. All options are initially assumed to vest. Compensation previously
recognized is reversed to the extent applicable to forfeitures of unvested options. EchoStar’s pro forma net loss
attributable to common shares and pro forma basic and diluted loss per common share were as follows ( in thousands,
except per share amounts):
Years Ended December 31,
1995 1996 1997
Net loss attributable to common shares ......................... $(13,079) $(103,120) $(323,371)
Basic and diluted loss per share ................................ .... $( 0.37) $( 2.54) $( 7.71)
The fair value of each option grant was estimated at the date of the grant using a Black-Scholes option pricing
model with the following weighted-average assumptions:
Years Ended December 31,
1995 1996 1997
Risk-free interest rate ................................ ......... 6.12% 6.80% 6.09%
Volatility factor ................................ ................. 62% 62% 68%
Dividend yield ................................ ................... 0.00% 0.00% 0.00%
Expected term of options ................................ ..... 6 years 6 years 6 years
Weighted-average fair value of options granted .... $ 9.86 $ 16.96 $ 10.38