Western Digital 2003 Annual Report Download - page 47

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WESTERN DIGITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
For the years ended June 27, 2003, June 28, 2002 and June 29, 2001, 19.9 million, 24.7 million and 23.3 million
shares, respectively, relating to the possible exercise of outstanding stock options were not included in the computation of
diluted income (loss) per share. Also, for the years ended June 28, 2002 and June 29, 2001, an additional 2.9 million
and 4.0 million shares, respectively, issuable upon conversion of the convertible debentures were excluded from the
computation of diluted income (loss) per share. The eÅects of these items were not included in the computation of
diluted income (loss) per share as their eÅect would have been anti-dilutive.
Stock-Based Compensation
Statement of Financial Accounting Standards No. 123, ""Accounting for Stock-Based Compensation'' (""SFAS
123''), establishes the Ñnancial accounting and reporting standards for stock-based compensation plans. As permitted by
SFAS 123, the Company elected to continue accounting for stock-based employee compensation plans in accordance with
Accounting Principles Board Opinion No. 25, ""Accounting for Stock Issued to Employees'' and related interpretations
(""APB Opinion No. 25'') and to follow the pro forma net income (loss), pro forma earnings (loss) per share, and
stock-based compensation plan disclosure requirements set forth in SFAS 123. The following table sets forth the
computation of basic and diluted earnings (loss) per share for each of the past three Ñscal years and illustrates the eÅect
on net income (loss) and earnings (loss) per share as if the Company had applied the fair value recognition provisions of
SFAS 123 to stock-based employee compensation.
Year Ended
June 27, June 28, June 29,
2003 2002 2001
(in millions,
except per share amounts)
Net income (loss)
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $182.1 $ 65.4 $ (98.9)
Stock-based employee compensation included in reported earnings ÏÏ 2.0 1.6 0.7
Stock-based employee compensation expense determined under
fair-value based methods for all awardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (27.3) (24.7) (30.4)
Pro forma net income (loss)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $156.8 $ 42.3 $(128.6)
Basic income (loss) per share:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.93 $ 0.35 $ (0.59)
Pro forma ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.80 $ 0.22 $ (0.76)
Diluted income (loss) per share:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.89 $ 0.34 $ (0.59)
Pro forma ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.77 $ 0.22 $ (0.76)
The pro forma earnings (loss) per share information is estimated using the Black-Scholes option pricing model. The
Black Scholes model was developed for use in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. This model also requires the input of highly subjective assumptions including the expected
stock price volatility and expected period until options are exercised (see Note 6 for additional information on fair value
disclosures). The pro forma impact of applying SFAS 123 at June 27, 2003 is not necessarily representative of future
periods.
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