Because the FASB treasury-stock method systematically understates the dilutive
effects of outstanding options, thereby biasing FASB-diluted EPS upward, this accounting treatment is aggressive, and is neither unbiased nor conservative.
Convertible securities may be dilutive
on their own but anti-dilutive when included with other potential common shares in computing diluted EPS.
According to the FASB, "The objective of diluted EPS is consistent [TABULAR DATA FOR EXHIBIT 4 OMITTED] [TABULAR DATA FOR EXHIBIT 5 OMITTED] [TABULAR DATA FOR EXHIBIT 6 OMITTED] with that of basic EPS - to measure the performance of an entity over the reporting period while giving effect to all dilutive
potential common shares that were outstanding during the period." While basic EPS is determined from historical data, dilutive
EPS also takes prospective events into consideration and presents a conservative scenario.
Both Diluted EPS (under the new standard) and Fully Diluted EPS (under the previous standard) consider the dilutive
effect of all potential common stock.
Qualcomm estimates that on a non-GAAP basis the acquisition will be modestly dilutive
to earnings per share in fiscal 2011 and modestly accretive in fiscal 2012, consistent with its previous forecasts.
We believe the combined resources of our two organizations will result in enhanced presence and increased market share and serve to rationalize distribution for the company in the HBA (health and beauty aids) and VMS (vitamins, minerals and supplements) categories." The company said it expects the acquisition to be slightly dilutive
for the current quarter's earnings, neutral to full year fiscal 2005 earnings per share and accretive thereafter.
Acxiom expects the transaction to be slightly dilutive
for the balance of fiscal 2004 and to be accretive for fiscal 2005.
Due to start-up costs that are expected to be dilutive
to earnings, Varian adjusted its guidance for the second half of its fiscal year to $0.82-$0.83 diluted EPS.
Major privately held players like Kushner Companies also often enjoy the benefit of "patient capital," or the financial ability and flexibility to invest in properties that may be dilutive
in the short-term, but promise significant long-term profitability.
The increased use of these dilutive
securities--in particular, of executive stock options--has attracted the attention of the business press, regulators, and academics.
For shareholders, the preferred issues were about 30 percent dilutive
once they were converted into common, Sprague says.
For the near-term, however, i2 expects the acquisition to be dilutive
until the fourth quarter of 2000, and to add to earnings after that.