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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (83082)	8/17/2000 7:45:04 PM
From: Exacctnt	Respond to of 132070

I should have expanded my comments. Options do not have to be vested to be in the calculation for EPS. Options most likely will be used in the calculation in the following steps: 1.) Determine the number of options outstanding. 2.) Determine the amount of cash they will receive from those shares when exercised. Which would be grant price times number of shares. 3.) Calculate the difference in price of outstanding shares between current market price and grant price. Which would be the prospective gain to the employee. 4.) Multiply the prospective gains times the effective tax rate. Which is the tax credit received. 5.) Add together the amounts determined in steps 2 and 4. Then divide that amount by the current market price. This provides the number of shares that theoretically would offset or pay for the issuance of stock when options are exercised. 6.) Subtract the number of shares determined in step 5 from the number of option shares outstanding. This is the number of option shares used in the EPS calculation for the quarter being reported. 7.) Add the number of option shares determined in step 6 to the total outstanding common shares. This gives you the denominator in the EPS calculation. Caveats: The number of shares used in the EPS calculation is a weighted average number by quarter. The above steps determines Fully Diluted EPS. For primary or basic EPS, in-the-money option shares are used. Some companies use a Treasury stock account when dealing with employee options. Stock issued to employees are taken from this account. Stock buyback programs replenish it.