Salesforce.com 2009 Annual Report Download - page 71

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
Net Income Per Share
Basic net income per share attributable to salesforce.com is computed by dividing net income attributable to salesforce.com by the weighted-average
number of common shares outstanding for the fiscal period. Diluted net income per share attributable to salesforce.com is computed giving effect to all
potential dilutive common stock, including options and restricted stock units. The dilutive effect of outstanding awards is reflected in diluted earnings per
share by application of the treasury stock method.
A reconciliation of the denominator used in the calculation of basic and diluted net income per share attributable to salesforce.com is as follows (in
thousands):
Fiscal Year Ended January 31,
2010 2009 2008
Numerator:
Net income attributable to salesforce.com $ 80,719 $ 43,428 $ 18,356
Denominator:
Weighted-average shares outstanding for basic earnings per share 124,462 121,183 116,840
Effect of dilutive securities:
Employee stock awards 3,652 4,045 5,582
Adjusted weighted-average shares outstanding and assumed conversions for diluted earnings per share 128,114 125,228 122,422
The following were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact. The dilutive securities
are excluded when, for example, their exercise prices, unrecognized compensation and tax benefits are greater than the average fair values of the Company's
common stock (in thousands).
Fiscal Year Ended January 31,
2010 2009 2008
Stock awards 4,455 3,797 3,175
Warrants 6,736 — —
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 total income tax benefit recognized in the accompanying consolidated statements of operations related to stock-based awards was $32.1 million,
$26.3 million and $18.5 million for fiscal years 2010, 2009 and 2008, respectively.
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in its tax provision. As of January 31, 2010, the Company
accrued no penalties and immaterial amount of interest in income tax expense.
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