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DIS » Topics » POTENTIAL DILUTION FROM EMPLOYEE STOCK OPTIONS

This excerpt taken from the DIS 10-K filed Dec 7, 2005.
POTENTIAL DILUTION FROM EMPLOYEE STOCK OPTIONS

      Fully diluted shares outstanding and diluted earnings per share include the effect of in-the-money stock options calculated based on the average share price for the period and assumes conversion of the convertible senior notes (see Note 6 to the Consolidated Financial Statements). The dilution from outstanding employee options would increase if the Company’s share price increases, as shown below:

                                     
Average Total Percentage of Hypothetical
Disney In-the-Money Incremental Average Shares FY 2005 EPS
Share Price Options Diluted Shares(1) Outstanding Impact(3)
$ 26.76       132 million       —
 (2)     —     $ 0.00  
  30.00       161 million       7 million       0.34 %     (0.00 )
  40.00       219 million       34 million       1.63 %     (0.02 )
  50.00       226 million       53 million       2.54 %     (0.03 )

(1)  Represents the incremental impact on fully diluted shares outstanding assuming the average share prices indicated, using the treasury stock method. Under the treasury stock method, the assumed proceeds that would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.
 
(2)  Fully diluted shares outstanding for the year ended October 1, 2005 total 2,089 million and include the dilutive impact of in-the-money options at the average share price for the period of $26.76 and the assumed conversion of the convertible senior notes. At the average share price of $26.76, the dilutive impact of in-the-money options was 16 million shares for the year.
 
(3)  Based upon fiscal 2005 income before the cumulative effect of accounting change of $2.6 billion or $1.24 diluted earnings per share before the cumulative effect of accounting change.

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