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Technology Stocks : Echelon Corporation (ELON) -- Ignore unavailable to you. Want to Upgrade?

To: pranadude who wrote (2998)	7/14/2002 3:28:29 PM
From: Ted The Technician	Respond to of 3076

Pranadude, There are two items here related to options. There is the issue of expensing options( i.e., immediately recording the granting of options as an expense which is dependent on the stock's price at the time of the grant ). The second item is the cost of converting the options into stock which is a function of the stock's current appreciation. The issue I'm referring to is the first item. The item mentioned in the proxy statement is referring to the second item. For the first item, from ELON's recent 10k (see ---- section at bottom): Year Ended December 31, 2001 2000 1999 As reported diluted 0.15 0.00 (0.12 ) Pro forma diluted (.61 ) (0.63 ) (0.28 ) I estimate the options cost was about 0.76 (0.15 + 0.61) last year. Divide 0.76 by four and I get -$0.19/shr per quarter (so my estimate of -$0.14/shr per quarter is off a bit). Beware, a one penny reduction in earnings could equate to much more than a penny reduction in stock price. From the proxy statement, the more the stock appreciates, the more the cost will be for for the company to convert the options into stock. ----------------- From 10K: The Company accounts for the Plans under APB Opinion No. 25, “Accounting for Stock Issued to Employees.” Had compensation expense for the Plans been determined consistent with SFAS No. 123, “Accounting for Stock-Based Compensation,” the Company’s net income/(loss) and basic and diluted net income/(loss) per share would have been (decreased)/increased to the following pro forma amounts (in thousands, except per share amounts): Year Ended December 31, 2001 2000 1999 Net income/(loss): As reported $ 6,046 $ 84 $ (3,907 ) Pro forma (23,589 ) (22,275 ) (9,052 ) Basic and diluted net income/(loss) per share: As reported basic $ 0.16 $ 0.00 $ (0.12 ) As reported diluted 0.15 0.00 (0.12 ) Pro forma basic (.61 ) (0.63 ) (0.28 ) Pro forma diluted (.61 ) (0.63 ) (0.28 ) The weighted-average grant date fair value of options granted during 2001 was $13.16, $27.20 in 2000 and $6.18 in 1999. Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions: Year Ended December 31, 2001 2000 1999 Expected dividend yield 0.0 % 0.0 % 0.0 % Risk-free interest rate 4.5 % 6.4 % 6.6 % Expected volatility 129.0 % 124.0 % 150.0 % Expected life (in years) 4.4 4.2 3.0