Salesforce.com 2007 Annual Report Download - page 65

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
A reconciliation of the denominator used in the calculation of basic and diluted net income per share is as follows (in thousands):
Fiscal Year Ended January 31,
2008 2007 2006
Numerator:
Net income $ 18,356 $ 481 $ 28,474
Denominator:
Weighted-average shares outstanding for basic earnings per share, net of weighted-average shares of common stock subject to
repurchase 116,840 112,386 107,274
Effect of dilutive securities:
Employee stock awards and warrants 5,582 7,768 11,463
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share 122,422 120,154 118,737
Outstanding unvested common stock purchased by employees is subject to repurchase by the Company and therefore is not included in the calculation
of the weighted-average shares outstanding for basic earnings per share.
The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact (in thousands). The
dilutive securities are excluded when, for example, their exercise prices are greater than the average fair values of the Company's common stock.
Fiscal Year Ended January 31,
2008 2007 2006
Stock awards 3,175 4,019 387
Income Taxes
The Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on
temporary differences between the financial statement and tax basis of assets and liabilities and net operating loss and credit carryforwards using enacted tax
rates in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce deferred tax assets to the
amounts more likely than not expected to be realized.
The Company recorded a provision for income taxes of $23.4 million during fiscal 2008, compared to a provision of $9.8 million during the same
period a year ago and an income tax benefit in fiscal 2006 of $1.3 million
The total income tax benefit recognized in the accompanying consolidated statements of operations related to SFAS 123R was $18.5 million and $12.4
million for fiscal 2008 and 2007, respectively, and related to APB 25 $1.3 million during fiscal 2006.
The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes, or
Interpretation 48, on February 1, 2007. As a result of the implementation of Interpretation 48, the Company recorded a cumulative effect adjustment of $0.3
million as an
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