Fannie Mae 2007 Annual Report Download - page 247

significantly alter current forecasts of taxable income, a substantial valuation allowance for our net deferred
tax assets may be required.
As of December 31, 2007, we had tax credit carry forwards of $1.9 billion that expire starting in 2026.
The IRS is currently examining our 2005 and 2006 federal income tax returns. The IRS Appeals Division is
currently considering issues related to tax years 1999-2004.
12. Earnings Per Share
The following table displays the computation of basic and diluted earnings per share of common stock.
2007 2006 2005
For the Year Ended
December 31,
(Dollars and shares in millions,
except per share amounts)
Income (loss) before extraordinary gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . $(2,035) $4,047 $6,294
Extraordinary gains (losses), net of tax effect . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) 12 53
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,050) 4,059 6,347
Preferred stock dividends and issuance costs at redemption . . . . . . . . . . . . . . . . . (513) (511) (486)
Net income (loss) available to common stockholders—basic . . . . . . . . . . . . . . . . (2,563) 3,548 5,861
Convertible preferred stock dividends
(1)
............................... — — 135
Net income (loss) available to common stockholders—diluted . . . . . . . . . . . . . $(2,563) $3,548 $5,996
Weighted-average common shares outstanding—basic . . . . . . . . . . . . . . . . . . . . . 973 971 970
Dilutive potential common shares:
Stock-based awards
(2)
......................................... — 1 1
Convertible preferred stock
(3)
.................................... — — 27
Weighted-average common shares outstanding—diluted . . . . . . . . . . . . . . . . . . . 973 972 998
Basic earnings (loss) per share:
Earnings (loss) before extraordinary gains (losses)
(4)
. . . . . . . . . . . . . . . . . . . . $ (2.62) $ 3.64 $ 5.99
Extraordinary gains (losses), net of tax effect . . . . . . . . . . . . . . . . . . . . . . . . . (0.01) 0.01 0.05
Basic earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2.63) $ 3.65 $ 6.04
Diluted earnings (loss) per share:
Earnings (loss) before extraordinary gains (losses)
(4)
. . . . . . . . . . . . . . . . . . . . $ (2.62) $ 3.64 $ 5.96
Extraordinary gains (losses), net of tax effect . . . . . . . . . . . . . . . . . . . . . . . . . (0.01) 0.01 0.05
Diluted earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (2.63) $ 3.65 $ 6.01
(1)
In the computation of diluted EPS, convertible preferred stock dividends are added back to net income available to
common stockholders when the assumed conversion of the preferred shares is dilutive and is assumed to be converted
from the beginning of the period.
(2)
Represents incremental shares from in-the-money nonqualified stock options and other performance awards. Weighted-
average options and performance awards to purchase approximately 23 million, 20 million and 22 million shares of
common stock for the years ended December 31, 2007, 2006 and 2005, respectively, were outstanding in each period,
but were excluded from the computation of diluted EPS since they would have been anti-dilutive.
(3)
Represents incremental shares from the assumed conversion of outstanding convertible preferred stock when the
assumed conversion of the preferred shares is dilutive and is assumed to be converted from the beginning of the year.
(4)
Amount is net of preferred stock dividends and issuance costs at redemption.
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FANNIE MAE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)