EMC 2007 Annual Report Download - page 93

EMC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
O. 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):
2007 2006 2005
Numerator:
Net income, as reported – basic $1,665,668 $1,227,601 $1,133,165
Adjustment for interest expense on Documentum Notes, net of taxes — 643 2,572
Incremental dilution from VMware (4,756) — —
Net income – diluted $1,660,912 $1,228,244 $1,135,737
Denominator:
Basic weighted average common shares outstanding 2,079,542 2,248,431 2,382,977
Weighted common stock equivalents 54,651 35,609 40,549
Assumed conversion of the Notes and Sold Warrants 23,680 — —
Assumed conversion of Documentum Notes — 2,264 9,056
Diluted weighted average shares outstanding 2,157,873 2,286,304 2,432,582
Options to acquire 98.4 million, 213.1 million and 91.7 million shares of common stock as of December 31, 2007, 2006 and 2005, respectively, were
excluded from the calculation of diluted earnings per share because of their antidilutive effect. As of December 31, 2007, there were 20.6 million and
3.1 million shares potentially issuable under our Notes and Sold Warrants, respectively. The effect of the Documentum Notes on the calculation of diluted net
income per weighted average share for the years ended December 31, 2006 and 2005 was calculated using the "if converted" method. See Note E for further
information regarding the Notes, the Sold Warrants and the Documentum Notes. The incremental deduction from VMware represent the impact of VMware's
dilutive securities on EMC's consolidated diluted net income per share and is calculated by multiplying the difference between VMware's basic and diluted
earning per share by the number of VMware shares owned by EMC.
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 2007 and 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.
Share Repurchase Program
On July 1, 2004, the Massachusetts Business Corporation Act (the "MBCA") became effective and eliminated treasury shares. Under the MBCA, shares
repurchased by Massachusetts corporations constitute authorized but unissued shares. As a result, all of our former treasury shares were automatically
converted to unissued shares on July 1, 2004 and have been accounted for as a reduction of common stock (at par value) and additional paid-in capital.
We utilize both authorized and unissued shares including repurchased shares, to satisfy all shares issued under our equity plans. In April 2006, our Board
of Directors authorized the repurchase of 250.0 million shares of our common stock. In 2007, we repurchased 89.4 million shares of our common stock. Of
the 250.0 million shares authorized for repurchase through December 31, 2007 we have repurchased 199.2 million shares at a total cost of $2.7 billion, leaving
a remaining balance of 50.8 million shares authorized for future repurchases. In 2006, the Board also authorized a one-time repurchase of up to 100.0 million
shares in conjunction with our issuance of the Notes. Of this amount, 75.0 million shares were repurchased using $945.8 million of the net proceeds from the
Notes.
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