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To: J. Kerner who wrote (3342)	6/24/1998 8:13:00 PM
From: Pirah Naman	Respond to of 10309

Jason: >My impression is the calculations are not as damaging as the FAS 123 shows Until actual costs are known, we should not be assuming that. > the effect once the options are exercised would be a dilution of stock Not good for current owners. > minus any buyback A cost for current owners. > if the stock price increases dramatically Then so will the eventual cost to the owners. Therefore the Pro Forma effect should be greater. > you cannot compare the FAS 123 between a company whose stock has risen with a company whose stock has dropped Sure you can. One has a higher employee cost than does the other. This "FAS 123 Pro Forma" is another accounting fiction (just like not including this compensation cost in the income statement) but it is the only mechanism we currently have to estimate a real economic cost. > if another company's employees have exercised all their options then their options will not show up as part of the FAS 123 Then we will see either a dilution, or a reduction in cash (perhaps an increase in debt). Forget comparing one company to another. The "problem" is that there is a very real economic cost to owners that in this case has the potetnial to be quite significant. If anybody would like to read a very basic description of how this works (the cost, not the accounting rule) then go see: members.aol.com Go to the Market View and read March 13, 1998. Pirah

To: J. Kerner who wrote (3342)	6/24/1998 8:25:00 PM
From: R Stevens	Read Replies (2) \| Respond to of 10309

Do you know the time and location of the Shareholder's meeting?

To: J. Kerner who wrote (3342)	6/25/1998 12:52:00 PM
From: Pirah Naman	Read Replies (1) \| Respond to of 10309

> My impression is the calculations are not as damaging as the FAS 123 shows Jason, I took a look at the annual report last night. In the last fiscal year WIND employees exercised 720,000 options at an average price of $3.36, for a total of about $2.4M (cash in to the company). During that same year WIND purchased $12.4M of shares on the open market. Net cash out about $10M. The FAS 123 estimated costs of the options was about $10.5M. Now of course WIND could elect to purchase either more or less shares, so this seeming accuracy is probably just coincidental. (And the company does have an employee stock purchase plan, which distorts these numbers somewhat.) But take a look at the statement of cash flows; the amount which goes to fund share purchases is a significant fraction of the cash flow from operations. This is no KO or SGP with excess free cash flow (and constantly reducing share count), it is just an attempt to slow the rate of dilution (which looks to have been roughly 10% per year over the past couple of fiscal years). Given that the shares repurchased (364,000 in fiscal 98) are so much less than the net change in share count (about 2,300,000 in fiscal 98) I'm starting to wonder if simply allowing the extra dilution wouldn't be less damaging than spending so much to fight it. Pirah