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To: Stock Farmer who wrote (43489)	6/14/2001 4:14:55 PM
From: Tom Chwojko-Frank	Respond to of 54805

That was exactly the kind of information I was looking for. I hadn't know about the tax consequences. Now I think I can take a 10K and reasonably remove option related items to get a clearer picture. Thanks! Tom CF

To: Stock Farmer who wrote (43489)	6/14/2001 5:47:42 PM
From: hueyone	Read Replies (2) \| Respond to of 54805

John: Thanks very much for responding to Tom regarding the options "issue". The more I learn about this issue, the more I realize how options can materially distort our perception of performance of many of the companies we follow. For example, when I calculate the free cash flow per share measure of a company, this free cash flow per share measaure may be significantly boosted by the tax rebate the IRS allows the company--- when the IRS recognizes the difference between the market price and the strike price of an option as a "cost". Interestingly enough, though companies are more than happy to accept this tax rebate from the IRS, this same "cost" is generally not reported to investors as an earnings charge. The impact on plain on old cash flow per share and earnings per share from options activities (for companies who do not expense options) can be even more dramatic than the impact on free cash flow per share, since there is the boost to both cash from operating activities (tax rebate) and a boost to cash from financing activities from the income from sale of the stock. From the Fortune table I referenced yesterday, it looks like the impact on earnings per share and cash flow per share from expensing options would be quite dramatic for some companies but not for others. Like what is excluded and included in "pro forma" earnings reports, it looks like a company's options program (and its impact on cash flow) is another important issue to wade through when evaluating the fundamental soundness of a company's business model. Thanks again for your lucid primer on the subject. Best, Huey