Freddie Mac 2006 Annual Report Download - page 163

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accrue in arrears. The balance of the two step-down preferred stock issuances as recorded within Minority interests in
consolidated subsidiaries on our consolidated balance sheets totaled $503 million and $934 million at December 31, 2006
and 2005, respectively.
On November 10, 2005, we oÅered to purchase for cash any and all of the outstanding shares of the outstanding step-
down preferred stock, of which $142 million was purchased between the oÅer date and December 31, 2005. During 2006, we
purchased an additional $27 million of the preferred stock. The preferred stock continues to be redeemable by the REITs
under certain circumstances described in the preferred stock oÅering documents as a ""tax event redemption.''
NOTE 19: EARNINGS PER COMMON SHARE
Because we have participating securities, we use the ""two-class'' method of computing earnings per share. Basic
earnings per common share are computed by dividing Net income available to common stockholders by Weighted average
common shares outstanding-basic for the period. Diluted earnings per common share are computed as Net income available
to common stockholders divided by Weighted average common shares outstanding-diluted for the period, which consider
the eÅect of dilutive common equivalent shares outstanding. The eÅect of dilutive common equivalent shares outstanding
includes: (a) the weighted average shares related to stock options (including the ESPP) that have an exercise price lower
than the average market price during the period; (b) the weighted average of non-vested restricted shares; and (c) all
restricted stock units. Such items are excluded from Weighted average common shares outstanding Ì basic. See
""NOTE 11: STOCK-BASED COMPENSATION'' for additional information. For the years ended December 31, 2006,
2005 and 2004, there were approximately 1,808,000, 1,929,000 and 2,239,000 of dilutive common equivalent shares
outstanding that could potentially dilute earnings per common share.
Options to purchase 1.9 million, 2.3 million and 2.4 million shares of common stock were excluded from the
computation of Diluted earnings per common share at December 31, 2006, 2005 and 2004, respectively, because the options'
exercise price exceeded the average market price of the common stock for the years ended December 31, 2006, 2005 and
2004, respectively.
END OF CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
151 Freddie Mac