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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Stock Farmer who wrote (43495)6/14/2001 7:14:10 PM
From: hueyone  Read Replies (1) of 54805
 
If you want to account for employee benefit of stock option as a compensation expense? Forget about trying to retrofit that one. The necessary data is not disclosed.

I mentioned impact of options program on EPS primarily because in the Fortune piece, they tried to construct a table showing impact on earnings by costing options using a Black-Scholes options pricing model:

fortune.com

I like your suggestion to exclude the effect of stock option exercise in determining free cash flow, but your previous example went beyond free cash flow to reference the entire consolidated cash flow statement which includes cash flow from investing activities and cash flow from financing activities. To continue with the Cisco example you began with, for the fiscal year ending July, 29, 2000 , I calculate a modified free cash flow of 2.56 billion dollars, or 6.141 billion net cash provided by operating activities less 2.495 billion in tax benefits from employee stock options plan less 2.560 billion in acquisition of property and equipment. If this is divided by the weighted average diluted shares at the end of the fiscal year of 7.438 billion shares, then I get free cash flow per share of .34 cents per share for the fiscal year ending July, 2000. Does this number agree with your modified free cash flow per share?

Best, Huey
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