Circuit City 2003 Annual Report Download - page 51

2003 2002 2001
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Net income (loss) - as reported $5,611 $(58,939) $653
Stock-based employee compensation expense determined
under fair value based method, net of related tax effects 544 713 780
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Pro forma net income (loss) $5,067 $(59,652) $(127)
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Basic and diluted net income (loss) per common share:
Net income (loss) - as reported $.16 $(1.73) $.02
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Net income (loss) - pro forma $.15 $(1.75) -
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2003 2002 2001
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Expected dividend yield 0% 0% 0%
Risk-free interest rate 5.9% 5.6% 6.1%
Expected volatility 76.0% 71.0% 72.0%
Expected life in years 2.41 2.52 3.17
period exceeds the exercise price of the options. The weighted average number of stock options outstanding
excluded from the computation of diluted earnings per share was 697,000 in 2003, 1,149,000 in 2002 and
1,979,000 in 2001 due to their antidilutive effect.
The weighted average common shares outstanding for the computation of basic earnings per common share for
2003, 2002 and 2001 were 34.2 million, 34.1 million and 34.1 million, respectively. Additionally, in 2003,
715,000 of equivalent common shares and in 2001, 19,000 of equivalent common shares were included for the
diluted calculation.
Comprehensive Income (Loss) - Comprehensive income (loss) consists of net income (loss) and foreign currency
translation adjustments and is included in the Consolidated Statements of Shareholders' Equity. Comprehensive
income (loss) was $9,898,000 in 2003, $(53,031,000) in 2002 and $(723,000) in 2001, net of tax effects on foreign
currency translation adjustments of $(3,030,000) in 2003, $3,483,000 in 2002 and $1,338,000 in 2001.
Stock-based Compensation - The Company has three stock-based compensation plans, two of which are for
employees, consultants and advisors and the third of which is for non-employee directors, which are more fully
described in Note 8. The Company has elected to follow the accounting provisions of Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees" for stock-based compensation and to provide
the pro forma disclosures required under SFAS 148, "Accounting for Stock-based Compensation – Transition and
Disclosure". No stock-based employee compensation cost is reflected in net income (loss), as all options granted
under the plans have an exercise price equal to the market value of the underlying stock on the date of grant. The
following table illustrates the effect on net income (loss) and earnings (loss) per share had compensation costs of
the plans been determined under a fair value alternative method as stated in SFAS 123, "Accounting for Stock-
Based Compensation" (in thousands, except per share data):
The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model
with the following assumptions:
The weighted average contractual life of the stock options outstanding was 7.7 years at December 31, 2003, 7.8
years at December 31, 2002 and 8.1 years at December 31, 2001.
Recent Accounting Pronouncements
In November 2002, the Financial Accounting Standards Board ("FASB") issued Interpretation 45 ("FIN 45")
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others", which requires that a guarantor recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the guarantee. However, the provisions related to recognizing
a liability at inception of the guarantee for the fair value of the guarantor's obligations does not apply to product