I continued to analyze the convertible debt situation over the weekend and found something very troubling. I went to the earnings announcement and discovered the following: (here is the link http://biz.yahoo.com/bw/020423/230580_1.html )
The dilution is 4,450,000 shares or about 13.94%
The calculated earnings per share based on the non-diluted shares was $.44 ($12,171,000/27,469,415) but based on the fully diluted shares was REPORTED as $.43 - a 2% decrease per share when the total shares increased 13.94% Not mathematically possible. Using the numbers provided I calculated it to be $.38 ($12,171,000/31,920,243).
Somehow an additional $1,106,000 was picked up but I don't know where from.
"Rolling" or cookie jar earnings at the end of one quarter into the next or vice-versa is a common practice-especially when their are aquisitions to be accounted for..And I am sure enRon and daboys are pretty good at flopping from quarter to quarter. Sooner or later though, you go to retrieve those earnings that you tucked away from the previous quarter and you get bit! The old saying holds true here that you don't want to beat your estimates to high..because analysist will come to expect this and set you up for future "shortcomings". I have a feeling that the 50 million+ aquisition in the quarter tied their hands about holding back some earnings for the next quarter..thus the .04 upside surprise. They would love to stay at the .01 to .02 upside suprise quarter over quarter, but this .04 thing tells me that they are making sure that ALL accounting practices will hold up to any scrutiny...at least for another 2 years until management bails. enRon gets this baby into the 40's and I will sing his praises all the way to the bank.