American Home Shield 2004 Annual Report Download - page 57

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2004 annual report ServiceMaster 55
Earnings Per Share
Basic earnings per share is computed by dividing income
available to common stockholders by the weighted-average
number of shares outstanding for the period. The weighted
average common shares for the diluted earnings per share calcu-
lation includes the incremental effect related to outstanding
options whose market price is in excess of the exercise price.
Shares potentially issuable under convertible securities have
been considered outstanding for purposes of the diluted earnings
per share calculations. In computing diluted earnings per share,
the after-tax interest expense related to convertible securities is
added back to net income in the numerator, while the diluted
shares in the denominator include the shares issuable upon
conversion of the securities. Due to the losses incurred in 2003,
the denominator does not include the effects of options as it
would result in a less dilutive computation. As a result, 2003
diluted earnings per share are the same as basic earnings per
share. Had the Company recognized income from continuing
operations in 2003, incremental shares attributable to the assumed
exercise of outstanding options would have increased diluted
shares outstanding by 3.9 million shares. Shares potentially
issuable under convertible securities have not been considered
outstanding for 2003 and 2002 as their inclusion results in a less
dilutive computation. Had the inclusion of convertible securities
not resulted in a less dilutive computation in 2003 and 2002,
incremental shares attributable to the assumed conversion of
the securities would have increased shares outstanding by 8.0
million and 8.2 million shares, respectively, and the after-tax
interest expense related to the convertible securities that would
have been added to net income in the numerator would have
been $4.8 million for both 2003 and 2002.
The following table reconciles both the numerator and the denom-
inator of the basic earnings per share from continuing operations
computation to the numerator and the denominator of the diluted
earnings per share from continuing operations computation.
Options outstanding at December 31, 2004:
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise Prices as 12/31/04 Life Exercise Price at 12/31/04 Exercise Price
$8.40 — 10.78 13,912,301 5 Years $ 9.92 8,017,534 $ 9.70
$10.80 — 15.94 11,894,276 4 Years $ 12.27 8,398,460 $ 12.02
$16.12 — 22.32 5,763,479 4 Years $ 18.15 5,763,479 $ 18.15
$22.33 — 77.56 393,871 2 Years $ 40.77 393,871 $ 40.77
$8.40 — 77.56 31,963,927 4.4 Years $ 12.66 22,573,344 $ 13.26
(In thousands,
except per share data) For year ended 2004 For year ended 2003 For year ended 2002
Continuing Operations: Income Shares EPS Loss Shares EPS Income Shares EPS
Basic EPS $ 324,057 290,514 $ 1.12 $ (221,975) 295,610 $ (0.75) $ 157,303 300,383 $ 0.52
Effect of Dilutive
Securities:
Options 5,054 — 5,529
Convertible
securities 4,712 8,000 ——
Diluted EPS $ 328,769 303,568 $ 1.08 $ (221,975) 295,610 $ (0.75) $ 157,303 305,912 $ 0.51