EMC 2004 Annual Report Download - page 62

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Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following is a reconciliation of net income (loss) per weighted average share had we adopted FAS No. 123 (table in thousands, except per share
amounts):
2004 2003 2002
Net income (loss) $ 871,189 $ 496,108 $ (118,706)
Add back: Stock compensation costs, net of tax, on stock-based awards 40,345 9,288 8,434
Less: Stock compensation costs, net of tax, had stock compensation expense been measured at fair value (403,665) (382,307) (364,849)
Incremental stock option expense per FAS No. 123, net of taxes (363,320) (373,019) (356,415)
Adjusted net income (loss) $ 507,869 $ 123,089 $ (475,121)
Net income (loss) per weighted average share, basic – as reported $ 0.36 $ 0.22 $ (0.05)
Net income (loss) per weighted average share, diluted – as reported $ 0.36 $ 0.22 $ (0.05)
Adjusted net income (loss) per weighted average share, basic $ 0.21 $ 0.06 $ (0.22)
Adjusted net income (loss) per weighted average share, diluted $ 0.21 $ 0.06 $ (0.22)
The fair value of each option granted during 2004, 2003 and 2002 is estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions:
2004 2003 2002
Dividend yield None None None
Expected volatility 46.4% 55.0% 55.0%
Risk-free interest rate 3.18% 3.27% 3.44%
Expected life (in years) 4.2 5.0 5.0
The weighted average fair value of stock options granted at fair market value were as follows:
2004 $ 5.15
2003 $ 6.44
2002 $ 3.69
The weighted average fair value of stock options granted below fair market value were as follows:
2004 N/A
2003 $ 7.13
2002 N/A
New Accounting Pronouncements
In March 2004, the Financial Accounting Standards Board ("FASB") approved the consensus reached on the Emerging Issues Task Force Issue ("EITF")
No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments." EITF 03-01 provides guidance on determining
when an investment is considered impaired, whether that impairment is other-than-temporary and the measurement of an impairment loss. EITF 03-01 also
provides new disclosure requirements for 59