eTrade 1999 Annual Report Download - page 58

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In accordance with SFAS No. 123, Accounting for Stock-Based Compensation, the Company applied APB Opinion 25 and related
interpretations in accounting for its stock option plans, and accordingly does not record compensation costs on grants to associates. If
the Company had elected to recognize compensation cost based on the fair value of the option granted at the grant date as prescribed
by SFAS No. 123, net income (loss) and income (loss) per share, basic and diluted, would have been reduced (increased) to the pro
forma amounts shown below (in thousands, except per share amounts):
Years Ended September 30,
---------------------------
1999 1998 1997
-------- --------
-------
As Reported
Net income (loss)............................... $(54,438) $ 1,927
$19,193
Income (loss) per share-basic................... $ (0.23) $ 0.01 $
0.14
Income (loss) per share-diluted................. $ (0.23) $ 0.01 $
0.13
Pro Forma
Net income (loss)............................... $(97,564) $(21,664)
$12,886
Income (loss) per share-basic................... $ (0.41) $ (0.13) $
0.09
Income (loss) per share-diluted................. $ (0.41) $ (0.13) $
0.09
The Company's calculations were made using the minimum value method and Black-Scholes option pricing models with the following
weighted average assumptions:
Years Ended September 30,
------------------------------
1999 1998 1997
-------- -------- --------
Dividend yield............................. -- -- --
Expected volatility........................ 105% 75%
65%
Risk-free interest rate.................... 6% 6%
6%
Expected life of option following vesting
(in months)............................... 12 12 12
59
Under SFAS No. 123, the fair value of stock-based awards to associates is calculated using option pricing models, even though such
models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which
significantly differ from the Company's stock option awards. These models also require subjective assumptions, including future stock
price volatility and expected time to exercise, which greatly affect the calculated values.
The Company's calculations are based on a multiple option valuation approach and forfeitures are recognized as they occur. The
valuations of the computed weighted average fair values of option grants under SFAS No. 123 in fiscal 1999, 1998 and 1997 were
$6.94, $3.02, and $2.77, respectively.
Retirement Plans
The Company has a 401(k) salary deferral program for eligible associates who have met certain service requirements. The Company
2002. EDGAR Online, Inc.