3Ware 2001 Annual Report Download - page 37

N O T E S T O C O N S O L I D A T E D F I N A N C I A L S TAT E M E N T S
5.S T O C K H O L D E R S’ E Q U I T Y
A U T H O R I Z E D S H A R E S
On August 29, 2000, the Company’s stockholders approved an increase in the number of authorized shares of common
stock to 630 million.
S T O C K O P T I O N S A N D O T H E R S T O C K AWA R D S
The Company has in effect several stock-based plans under which nonqualified and incentive stock options have been
granted to employees and directors. At March 31, 2001, approximately 54.5 million stock options were outstanding
and 25.7 million shares were available for future grant under these plans.
The Compensation Committee of the Board of Directors determines eligibility, vesting schedules and exercise prices
for options granted under the plans. Options and other stock awards under the plans expire not more than ten years
from the date of grant and are either exercisable immediately after the date of grant and subject to certain repurchase
rights by the Company until such ownership rights have vested or are exercisable upon vesting. Vesting generally occurs
over four to five years. At March 31, 2000 and 2001, 1.1 million and 2.0 million shares of common stock were sub-
ject to repurchase, respectively. Options are granted at prices at least equal to fair value of the Company’s common
stock on the date of grant.
Pro forma information regarding net income and net income per share is required by SFAS No. 123 and has been deter-
mined as if the Company had accounted for its employee stock options under the fair value method of that statement.
The fair value of the options was estimated at the date of grant using the Black Scholes method.
The fair value of options granted in fiscal 1999, 2000 and 2001 reported below has been estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average assumptions:
Fiscal Year Ended March 31,
1999 2000 2001
Expected life (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 4.0 4.0
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0% 6.0% 6.0%
Volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.89 0.82 1.33
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0% 0% 0%
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have
no vesting restrictions and are fully transferable. In addition, option valuation models re q u i r e the input of highly
s u b j e c t i ve assumptions, including the expected stock price vo l a t i l i t y. Because the Company’s options have characteristics
significantly d i f f e rent from those of traded options, and because changes in the subjective input assumptions can mate-
rially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a
reliable single measure of the fair value of its options. The we i g h t e d - a verage estimated fair value of employee stock
options granted during fiscal 1999, 2000 and 2001, including options assumed through acquired companies, was $2.64,
$20.14 and $52.86 per share, re s p e c t i ve l y. For purposes of pro forma disclosures, the estimated fair value of the options
is amort i zed to expense over the options’ vesting periods. The Company’s pro forma information is as follows:
Fiscal Year Ended March 31,
(in thousands, except per share amounts) 1999 2000 2001
Pro forma net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,202 $19,385 $(681,862)
Pro forma basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.07 $ 0.09 $ (2.55)
Pro forma diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.06 $ 0.08 $ (2.55)
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