THQ 2005 Annual Report Download - page 88

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65
The following table shows what our net income and earnings per share would have been for the fiscal years
ended March31, 2005 and 2004, Transition 2003 and the year ended December 31, 2002 had we accounted
for our stock-based compensation plans under the fair value method of SFAS No. 123, as amended by
SFAS No. 148, “ Accountingfor Stock-Based Compensation—Transition and Disclosure,” using the
assumptions in the table above. For purposes of this pro forma disclosure, the estimated value of the
options is amortized ratably to expense over the options’ vesting periods. Because the estimated value is
determined as of the date of grant, the actual value ultimately realized by the employee may be
significantly different.
Fiscal Year Ended
March 31, Transition
Year Ended
December 31,
2005 2004 2003 2002
(In thousands, except per share data)
Net income (loss)—as reported ................... $62,790 $35,839 $(7,686) $ 12,994
Add: Stock-based employee compensation expense
included in reported net income (loss), net of
related tax effects ........................... —54119 104
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects . (12,996) (14,890) (4,033 ) (19,436)
Net income (loss)—pro forma.................... $49,794 $21,003 $(11,600) $ (6,338)
Earnings (loss) per share:
Basic—asreported .......................... $ 1.61 $ 0.94 $(0.20) $ 0.33
Basic—pro forma........................... $ 1.28 $ 0.55 $(0.30) $ (0.16)
Diluted—asreported ........................ $ 1.56 $ 0.92 $(0.20) $ 0.32
Diluted—pro forma......................... $ 1.24 $ 0.54 $(0.30) $ (0.16)
Income Taxes. Deferred income taxes are provided for temporary differences between the financial
statement and income tax bases of our assets and liabilities, based on enacted tax rates. A valuation
allowance is provided when it is more likely than not that some portion or all of the deferred income tax
assets will not be realized.
Basic and Diluted Earnings (Loss) Per Share. The following table is a reconciliation of the weighted-
average shares used in the computation of basic and diluted earnings (loss) per share for the periods
presented:
Fiscal Year Ended
March 31, Transition
Year Ended
December 31,
2005 2004 2003 2002
(In thousands, except per share data)
Net income (loss) used to compute basic
anddiluted earnings pershare ........... $ 62,790 $ 35,839 $(7,686) $ 12,994
Weighted average number of shares
outstanding—basic ..................... 39,030 38,186 38,319 39,203
Dilutive effect of stock options and warrants.1,213 818 — 2,040
Number of shares used to compute
earnings (loss) per share—diluted ........ 40,243 39,004 38,319 41,243
Stock options to purchase approximately 1,957,000, 4,146,000, and 2,462,000 shares of common stock in the
fiscal years ended March 31, 2005 and 2004, and the year ended December 31, 2002, respectively, were
outstanding but are not included in the computation of diluted earnings per common share because the
option exercise prices for these options were greater than the average market price per of our common