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36 | SOUTHWEST AIRLINES CO. 2002 10-K
The following table represents the effect on
net income and earnings per share if the
Company had applied the fair value based
method and recognition provisions of
Statement of Financial Accounting Standards
(SFAS) No. 123, “Accounting for Stock-Based
Compensation,” to stock-based Employee
compensation:
(In thousands, except per share amounts) 2002 2001 2000
Net income, as reported $ 240,969 $ 511,147 $ 603,093
Add: Stock-based Employee
compensation expense included in
reported income, net of related tax
effects 399 402 339
Deduct: Total stock-based Employee
compensation expense
determined under fair value based
methods for all awards, net of
related tax effects (53,489) (25,603) (19,725)
Pro forma net income $ 187,879 $ 485,946 $ 583,707
Net income per share
Basic, as reported $ .31 $ .67 $ .81
Basic, pro forma $ .24 $ .64 $ .78
Diluted, as reported $ .30 $ .63 $ .76
Diluted, pro forma $ .23 $ .61 $ .74
As required, the pro forma disclosures
above include options granted since
January 1, 1995. Consequently, the effects of
applying SFAS No. 123 for providing pro forma
disclosures may not be representative of the
effects on reported net income for future years
until all options outstanding are included in
the pro forma disclosures. For purposes of pro
forma disclosures, the estimated fair value of
stock-based compensation plans and other
options is amortized to expense primarily over
the vesting period. See Note 12 for further
discussion of the Company’s stock-based
Employee compensation.
In December 2002, the FASB issued
SFAS No. 148, “Accounting for Stock-Based
Compensation — Transition and Disclosure.”
SFAS No. 148 amends the transition and
disclosure provisions of SFAS No. 123. The
Company is currently evaluating SFAS No. 148
to determine if it will adopt SFAS No. 123 to
account for Employee stock options using the
fair value method and, if so, when to begin
transition to that method.