Notes To Consolidated Statements


The Company's Certificate of Incorporation provides for 200 million shares of common stock and 2 million shares of undesignated preferred stock.

Treasury Stock. The Company authorized a stock buyback program in September 1996 whereby up to 2 million shares of the Company's common stock may be purchased in the open market from time to time as market and business conditions warrant. The Company has reissued Treasury Shares repurchased in response to Employee Stock Option exercises and Employee Qualified Stock Purchase Plan requirements. During fiscal 1997, the Company repurchased 877,500 shares of common stock for $32 million, of which 837,000 shares were reissued.

Stock Split. In July 1995, the Company's stockholders approved a 3-for-1 stock split, in the form of a 200% stock dividend, payable to stockholders of record on a specified date. Shares, per share amounts, common stock at par value, and additional paid in capital have been restated to reflect the stock split for all periods presented.

Stockholder Rights Plan. In October 1991, the Company adopted a stockholder rights plan and declared a dividend distribution of one common stock purchase right for each outstanding share of common stock. The rights become exercisable based upon the occurrence of certain conditions including acquisitions of Company stock, tender or exchange offers and certain business combination transactions of the Company. In the event one of the conditions is triggered, each right entitles the registered holder to purchase a number of shares of common stock of the Company or, under limited circumstances, of the acquirer. The rights are redeemable at the Company's option, under certain conditions, for $.01 per right and expire on October 4, 2001.

Employee Stock Option Plan. The Company adopted the 1988 Stock Option Plan (the Option Plan) under which a total of 36,081,000 common shares have been reserved for issuance to employees, directors, and consultants of the Company, after shareholder approval of 3,300,000 additional shares in July 1996. Options to purchase shares of the Company's common stock under the Option Plan are granted at 100% of the fair market value of the stock on the date of grant. Options granted to date expire ten years from date of grant and generally vest at varying rates over five years.

A summary of the Company's Option Plan activity, and related information, follows:

Years ended March 31, 1997 1996 1995
Weighted Weighted Weighted
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
(000) Price (000) Price (000) Price
Outstanding at beginning of year 13,888 $16.78 11,452 $10.81 9,441 $ 8.23
Granted 2,597 33.52 3,971 30.95 3,540 15.84
Exercised (1,752) 10.58 (1,169) 6.22 (962) 4.21
Forfeited (1,025) 19.49 (366) 17.18 (567) 10.64
Outstanding at end of year 13,708 $20.54 13,888 $16.78 11,452 $10.81
Shares available for grant 2,992 1,264 1,869

The following table summarizes information relating to options outstanding and exercisable under the Option Plan at March 31, 1997:

Options Outstanding Options Exercisable
Average Weighted Weighted
Options Remaining Average Options Average
Range of Outstanding Contractual Exercise Exercisable Exercise
Exercise Prices (000) Life (Years) Price (000) Price
$ 0.12 $12.13 2,837 4.47 $ 5.82 2,674 $ 5.56
$12.58 $13.33 2,290 6.68 12.93 995 12.93
$13.33 $16.42 1,821 7.18 15.20 697 14.94
$16.67 $24.75 2,079 7.89 21.54 644 20.98
$26.63 $48.13 4,681 8.94 34.83 718 35.70
$ 0.12 $48.13 13,708 7.24 $20.54 5,728 $13.50

At March 31, 1996, 4.6 million options were exercisable.

Employee Qualified Stock Purchase Plan. Under the Company's 1990 Employee Qualified Stock Purchase Plan (the Stock Purchase Plan), qualified employees can elect to have up to 15 percent of their annual earnings withheld to purchase the Company's common stock at the end of six-month enrollment periods. The purchase price of the stock is 85% of the lower of the fair market value at the beginning of the twenty-four month offering period or at the end of each six-month purchase period. Almost all employees are eligible to participate. Of the 3,385,000 shares authorized to be issued under this plan, including the 460,000 shares that were approved by shareholders in July 1996, 535,360 and 537,451 shares were issued during 1997 and 1996, respectively, and 176,690 shares were available for issuance at March 31, 1997.

Stock-Based Compensation. As permitted under FASB Statement No. 123, "Accounting for Stock-Based Compensation" (FASB 123), the Company has elected to continue 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 awards to employees. Under APB 25, the Company generally recognizes no compensation expense with respect to such awards.

Pro forma information regarding net income and earnings per share is required by FASB 123 and has been determined as if the Company had accounted for awards to employees under the fair value method of FASB 123. The fair value of options and stock purchase plan rights under the Option Plan and Stock Purchase Plan was estimated as of the date of grant using the Black-Scholes option pricing model. The Black-Scholes model was originally 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 expected stock price volatility. Because the Company's options and stock purchase plan rights have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models, in management's opinion, do not necessarily provide a reliable single measure of the fair value of its stock-based awards to employees. The fair value of options and stock purchase plan rights granted in fiscal years 1997 and 1996 was estimated at the date of grant assuming no expected dividends and the following weighted average assumptions.

Stock Purchase
Stock Options Plan Rights
Years ended March 31, 1997 1996 1997 1996
Expected Life
(years) 4 4 .5 .5
Expected Stock Price
Volatility .56 .56 .56 .68
Risk-Free Interest
Rate 6.26% 5.97% 5.36% 5.61%

For purposes of pro forma disclosures, the estimated fair value of options is amortized against pro forma net income over the options' vesting period. Because FASB 123 is applicable only to The Company's awards granted subsequent to March 31, 1995, its pro forma effect will not be fully reflected until approximately fiscal 2000. Had the Company accounted for stock-based awards to employees under FASB 123, the Company's net income would have been $87.4 million and $86.2 million in 1997 and 1996, respectively, and net income per share would have been $1.12 and $1.10 in 1997 and 1996, respectively.

Calculated under FASB 123, the weighted-average fair value of the options granted during 1997 and 1996 was $15.91 and $14.41 per share, respectively. The weighted-average fair value of employee stock purchase rights granted under the Stock Purchase Plan during 1997 and 1996 were $14.47 and $16.68 per share, respectively.

| Previous Note | Next Note |

| Annual Report 1997 |
| Letter to Shareholders | Financial Highlights | MD&A | Consolidated Statements |
| Notes to Consolidated Statements | Selected Consolidated Information |