DQUAD’S BASIC EPS (NET INCOME / WEIGHTED AVERAGE COMMON SHARES OUT...

Quad’s basic EPS (net income / weighted average common shares outstanding) was ($892,000 / 400,000 =

$2.23.) Diluted EPS is calculated under the assumption that the convertible bonds are converted into

common stock as of January 1, 2001, the bond interest net of tax is restored to net income, and the

additional common shares are added to the denominator of the equation. Quad’s diluted EPS was

(($892,000 + ((2,000 * $1,000 * .06)(1 - .40)) / (400,000 + (2,000 * 40)) =) $2.01. Note that since diluted

EPS is less than basic EPS, we know that the bonds are dilutive and should be considered in calculating

diluted EPS.