SkyWest Airlines 2002 Annual Report Download - page 43

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Stock Options
The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for its stock-based compensation plans. Statement of Financial Accounting Standards
(‘‘SFAS’’) No. 123, Accounting for Stock-Based Compensation, requires pro forma information regarding
net income and net income per share as if the Company had accounted for its stock options under the
fair value method of the statement. The fair value of stock options was estimated at the grant date
using the Black-Scholes option pricing model with the following assumptions used for grants in
the years ended December 31, 2002, 2001 and 2000: a risk-free interest rate of 3.91% for 2002, 4.5%
for 2001 and 5.1% for 2000, a volatility factor of the expected common stock price of .584 for 2002,
.585 for 2001 and .520 for 2000, a weighted average expected life of four years for the stock options for
the years presented and an expected annual dividend rate of 0.3% for 2002. For purposes of the pro
forma disclosures, the estimated fair value of the stock options and employee stock purchases is
amortized over the vesting period of the respective stock options and employee stock purchases.
Following are the pro forma disclosures and the related impact on net income and net income per
share (in thousands, except per share information):
Year Ended December 31,
2002 2001 2000
Net income:
As reported .............................. $86,866 $50,516 $60,874
Pro forma ............................... $78,454 $46,114 $57,497
Net income per common share:
Diluted as reported ........................ $ 1.51 $ 0.88 $ 1.16
Diluted pro forma ......................... $ 1.36 $ 0.81 $ 1.09
Basic as reported .......................... $ 1.52 $ 0.90 $ 1.18
Basic proforma ........................... $ 1.37 $ 0.82 $ 1.12
Comprehensive Income
The Company reports comprehensive income in accordance with SFAS No. 130, Reporting
Comprehensive Income, which establishes standards for reporting and displaying comprehensive income
and its components in financial statements. Comprehensive income includes charges and credits to
stockholders’ equity that are not the results of transactions with shareholders. As of December 31, 2002
and 2001, accumulated other comprehensive loss includes adjustments, net of tax, to reflect unrealized
appreciation (depreciation) on marketable securities. The Company recorded net unrealized
appreciation (depreciation) of $168,000, ($615,000) and ($975,000), net of income taxes, on marketable
securities for the years ended December 31, 2002, 2001, and 2000, respectively. These adjustments have
been reflected in the accompanying consolidated statements of stockholders’ equity and comprehensive
income.
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