Dish Network 2003 Annual Report Download - page 85

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ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – Continued
F–18
For the Years Ended December 31,
2002
2003 As Restated 2001
(Note 3)
(In thousands, except per share amounts)
Net income (loss) to common shareholders, as reported ........................................... $ 224,506 $ (414,601) $ (215,835)
Add: Stock-based employee compensation expense included
in reported net income (loss), net of related tax effects ................................. 3,420 10,884 20,173
Deduct: Total stock-based employee compensation expense determined
under fair value based method for all awards, net of related tax effects ....... (26,138) (24,427) (25,745)
Pro forma net income (loss) to common shareholders...............................................
$
201,788
$
(428,144)
$
(221,407)
Basic income (loss) per share, as reported ................................................................ $ 0.46 $
(
0.86
)
$
(
0.45
)
Diluted income (loss) per share, as reported ............................................................. $ 0.46 $
(
0.86
)
$
(
0.45
)
Pro forma basic income (loss) per share ................................................................... $ 0.42 $
(
0.89
)
$
(
0.46
)
Pro forma diluted income (loss) per share ................................................................ $ 0.41 $
(
0.89
)
$
(
0.46
)
For purposes of this pro forma presentation, the fair market 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:
For the Years Ended December 31,
2003 2002 2001
Risk-free interest rate ......................................................... 3.32% 4.14% 4.94%
Volatility factor .................................................................. 71.08% 71.96% 73.79%
Expected term of options in years....................................... 6.7 6.7 6.0
Weighted-average fair value of options granted ................ $ 20.38 $ 15.08 $ 17.60
The dividend yield percentage is zero for all periods since we have not and do not intend to pay dividends on our
common stock in the near future. The Black-Scholes option valuation model was developed for use in estimating the
fair market value of traded options which have no vesting restrictions and are fully transferable and so, our estimate of
fair market value may differ from other valuation models. Further, the Black-Scholes model requires the input of
highly subjective assumptions and because changes in the subjective input assumptions can materially affect the fair
market value estimate, the existing models do not necessarily provide a reliable single measure of the fair market value
of stock-based compensation awards.
Basic and Diluted Income (Loss) Per Share
Statement of Financial Accounting Standards No. 128, “Earnings Per Share” (“FAS 128”) requires entities to
present both basic earnings per share (“EPS”) and diluted EPS. Basic EPS excludes dilution and is computed by
dividing income (loss) available to common shareholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that could occur if stock options were
exercised and convertible securities were converted to common stock.
We recorded a net loss attributable to common shareholders for the years ending December 31, 2002 and 2001.
Therefore, common stock equivalents and convertible securities are excluded from the computation of diluted
earnings (loss) per share for these periods since the effect of including them is anti-dilutive. Since we reported net
income attributable to common shareholders for the year ending December 31, 2003, the potential dilution from
stock options exercisable into common stock for these periods was computed using the treasury stock method based
on the average fair market value of the class A common stock for the period. The following table reflects the basic
and diluted weighted-average shares outstanding used to calculate basic and diluted earnings per share. Earnings
per share amounts for all periods are presented below in accordance with the requirements of FAS 128.