Dish Network 2000 Annual Report Download - page 76

ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–25
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):
Year Ended December 31,
1998 1999 2000
Net loss attributable to common shares .................................. $(297,197) $(749,836) $ (593,810)
Basic and diluted loss per share............................................. $ (0.83) $ (1.80) $ (1.26)
The pro forma net loss for 1999 and 2000 is less than the loss reported in the statement of operations
because of the $61 million and $51 million charge, respectively, for the post-grant appreciation of stock-based
compensation, determined under APB 25 and reported by EchoStar, is greater than the amount of stock-based
compensation that would have been reported by EchoStar under the provisions of FAS No. 123.
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:
Year Ended December 31,
1998 1999 2000
Risk-free interest rate......................................... 5.64% 5.38% 6.19%
Volatility factor ................................................. 67% 76% 98%
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 .... $ 1.51 $ 7.14 $ 30.41
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable. In addition, option valuation models require
the input of highly subjective assumptions including the expected stock price characteristics significantly different
from those of traded options, and because changes in the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of
the fair value of its stock-based compensation awards.
8. Employee Benefit Plans
Employee Stock Purchase Plan
During 1997, the Board of Directors and shareholders approved an employee stock purchase plan (the
“ESPP”), effective beginning October 1, 1997. Under the ESPP, EchoStar is authorized to issue a total of 800,000
shares of Class A common stock. Substantially all full-time employees who have been employed by EchoStar for at
least one calendar quarter are eligible to participate in the ESPP. Employee stock purchases are made through
payroll deductions. Under the terms of the ESPP, employees may not deduct an amount which would permit such
employee to purchase capital stock of EchoStar under all stock purchase plans of EchoStar at a rate which would
exceed $25,000 in fair market value of capital stock in any one year. The purchase price of the stock is 85% of the
closing price of the Class A common stock on the last business day of each calendar quarter in which such shares of
Class A common stock are deemed sold to an employee under the ESPP. The ESPP shall terminate upon the first to
occur of (i) October 1, 2007 or (ii) the date on which the ESPP is terminated by the Board of Directors. During
1998, 1999 and 2000, employees purchased approximately 128,000, 44,000 and 58,000 shares of Class A common
stock through the ESPP, respectively.