THQ 2008 Annual Report Download - page 93

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what would have been reported under APB 25 using the intrinsic value method, which was the method
used prior to our adoption (in thousands, except per share data):
Year Ended March 31, 2007
Intrinsic
Fair Value Value Impact of
Method Method Change
Income from continuing operations before income
taxes and minority interest .................. $91,028 $105,613 $14,585
Income from continuing operations ............. 64,958 75,963 11,005
Gain on sale of discontinued operations, net of tax . 3,080 3,080 —
Net income .............................. $68,038 $ 79,043 $11,005
Earnings per share—basic:
Continuing operations ..................... $ 1.00 $ 1.17 $ 0.17
Discontinued operations ................... 0.05 0.05 —
Earnings per share—basic .................. $ 1.05 $ 1.22 $ 0.17
Earnings per share—diluted:
Continued operations ..................... $ 0.96 $ 1.12 $ 0.16
Discontinued operations ................... 0.05 0.05 —
Earnings per share—diluted ................. $ 1.01 $ 1.17 $ 0.16
Prior to the adoption of FAS 123R, we presented all tax benefits of deductions resulting from our stock-
based awards as operating cash flows in the statement of cash flows. FAS 123R requires the cash flows
resulting from the tax benefits arising out of tax deductions in excess of the compensation recognized for
the stock-based awards (‘‘excess tax benefits’’) to be classified as financing cash flows. Prior to our
adoption of FAS 123R on April 1, 2006, the $4.0 million excess tax benefit classified as a financing cash
inflow in the year ended March 31, 2007 would have been classified as an operating cash inflow.
Proforma information for periods prior to the adoption of FAS 123R
Prior to the adoption of FAS 123R, we accounted for our stock-based compensation to employees using
the intrinsic value method in accordance with APB 25 and the disclosure-only provisions of FAS 123.
Employee stock-based compensation expense recognized under FAS 123R was not reflected in our results
of operations for the fiscal years ended March 31, 2006. Forfeitures of our stock-based awards were
reflected in our disclosures as they occurred. Previously reported amounts have not been restated relative
to our adoption of FAS 123R.
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-
pricing model. The following weighted-average assumptions were used for option grants made under our
stock option plans during the fiscal year ended March 31, 2006:
Fiscal year ended
March 31, 2006
Dividend yield ........................................ 0%
Anticipated volatility ................................... 51%
Weighted average risk-free interest rate ..................... 4.11%
Expected lives ........................................ 3 years
The following table shows what our net income and income per share would have been for the fiscal year
ended March 31, 2006, had compensation cost for our stock-based compensation been measured based on
85