EMC 2006 Annual Report Download - page 93

Table of Contents
EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
N. Stockholders' Equity
Net Income Per Share
The reconciliation from basic to diluted earnings per share for both the numerators and denominators is as follows (table in thousands):
2006 2005 2004
Numerator:
Net income, as reported - basic $ 1,223,982 $ 1,133,165 $ 871,189
Adjustment for interest expense on Documentum Notes, net of taxes . 643 2,572 2,572
Net income - diluted $ 1,224,625 $ 1,135,737 $ 873,761
Denominator:
Basic weighted average common shares outstanding 2,248,431 2,382,977 2,402,198
Weighted common stock equivalents 35,609 40,549 39,316
Assumed conversion of Documentum Notes 2,264 9,056 9,056
Diluted weighted average shares outstanding 2,286,304 2,432,582 2,450,570
Options to acquire 213.1 million, 91.7 million and 101.7 million shares of common stock as of December 31, 2006, 2005 and 2004, respectively, were
excluded from the calculation of diluted earnings per share because of their antidilutive effect. There were no shares potentially issuable under the Notes or
the Sold Warrants because these instruments were not "in-the-money." As a result, the Notes and the Sold Warrants were excluded from the calculation of
diluted net income per weighted average share for the year ended December 31, 2006. The effect of the Documentum Notes on the calculation of diluted net
income per weighted average share for the years ended December 31, 2006, 2005 and 2004 was calculated using the "if converted" method. See Note D for
further information regarding the Notes, the Sold Warrants and the Documentum Notes.
In connection with our adoption of FAS No. 123R, the calculation of assumed proceeds used to determine our diluted weighted average shares
outstanding under the treasury stock method in 2006 was adjusted by tax windfalls and shortfalls associated with all of our outstanding stock awards.
Windfalls and shortfalls are computed by comparing the tax deductible amount of outstanding stock awards to their grant date fair values and multiplying the
result by the applicable statutory tax rate. A positive result creates a windfall, which increases the assumed proceeds and a negative result creates a shortfall,
which reduces the assumed proceeds.
Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss, which is presented net of tax, consists of the following (table in thousands):
December 31,
2006
December 31,
2005
Foreign currency translation adjustments, net of tax benefits of $0 and $0 $ 13,672 $ (31,770)
Unrealized losses on investments, net of tax benefits of $1,736 and $2,538 (18,928) (38,187)
Unrealized gains on investments, net of taxes of $4,096 and $1,887 8,906 5,403
Unrealized gain on derivatives, net of taxes of $6 and $96 62 867
Impact of adoption of FAS No. 158, net of tax benefits of $36,909 and $0 (58,275) —
$ (54,563) $ (63,687)
Reclassification adjustments between other comprehensive income and the income statement consist of the following (table in thousands):
Year Ended December 31,
2006
2005 2004
Realized losses on investments, net of tax benefit of
$(10,338), $(21,671) and $(4,279) $ (17,469) $ (37,260) $ (7,397)
Realized gains (losses) on derivatives, net of taxes (benefit) of
$(611), $2,788 and $(947) (5,496) 25,091 (8,522)