don't forget to add those 2.3 million shares in your valuation calculations (2.3M shares are not in the diluted share count). Not such a great valuation once you add the shares. Not bad, but not great.
The shares in the ESOP plan are released so slowly (over a 23 year period), that I don't think that it is practical to consider all the ESOP shares as part of the current fully diluted share count.
From the 10K:
<snip> The Company will release shares to eligible employees over the remaining 23-year term of the ESOP loan based on the principal and interest payments made by the ESOP on the ESOP loan. Compensation expense is recorded for shares �committed to be released� to employees based on fair market value. <snip>
see Note 5 in the 10K for full details.
The trustee has sole discretion over the "unallocated" shares:
"Shares reported as owned by the ESOP Trust include 26,145 shares that are also reported as beneficially owned by the executive officers. The ESOP Trustee has dispositive power with respect to shares owned by the ESOP Trust. The ESOP Trustee may dispose of ESOP shares only at the direction of a committee appointed by the Company. During fiscal 2002 that committee consisted of the following officers of the Company: Douglas C. Williams, E. Larry Ryder and Jack R. Palmer (Vice President-Human Resources). The ESOP Trustee has sole voting power with respect to 1,629,646 shares held by the ESOP Trust, which have not been allocated to plan participants. Shares allocated to plan participants� accounts are voted by the ESOP Trustee in accordance with the directions of the participants, unless no directions are received. "
Of the 2.3MM ESOP shares, only 671k are eligible to be sold now if the participant so chose. At least that is how I read this.
Thus, the additional "real" dilution at present is roughly 671/5697 = 12%. This is not factored in to the current fd share count and should be.
So, I don't think it is as bad as you make it out to be.....
You are right, the dilution is not too bad. I had a closer look at the K and a 23 year distribution is pretty reasonable.
However, it appears there are two other things to consider along with dilution...1) were the company to be acquired tomorrow, the ESOP shares would all go to the employees, making for substantial dilution, 2) while the employees do not have control of the shares, or have a board seat, the ESOP must boost their position as a "stakeholder" in the company - would this make large layoffs difficult? Could be an important strategic consideration in the next few years.