This excerpt taken from the INFA 10-K filed Feb 28, 2008.
Net Income per Common Share
Under the provisions of SFAS No. 128, Earnings per Share, basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share reflects the potential dilution of securities by adding other common stock equivalents, primarily stock options, to the weighted-average number of common shares outstanding during the period, if dilutive. Potentially dilutive securities have been excluded from the computation of diluted net income per share if their inclusion is anti-dilutive.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The calculation of basic and diluted net income per share is as follows (in thousands, except per share data):
Diluted net income per common share is calculated according to SFAS 128, Earnings per Share, which requires the dilutive effect of convertible securities to be reflected in the diluted net income per share by application of the if-converted method. This method assumes an add-back of interest and issuance cost amortization, net of income taxes to net income if the securities are converted. The Company determined that for year ended December 31, 2007, the convertible senior notes had a dilutive effect on diluted net income per share, and as such, it had an add-back of $4.4 million in interest and issuance cost amortization, net of income taxes, to net income for the diluted net income per share calculation. For the year ended December 31, 2006, the effect of the convertible senior notes, equivalent to 9,232,000 common shares, was anti-dilutive.
For the years ended December 31, 2007, 2006, and 2005, options to purchase approximately 4.0 million, 2.7 million, and 1.2 million, respectively, of common stock with exercise price greater than the annual average fair market value of our stock of $14.83, $13.91, and $9.61, respectively, were not included in the calculation because the effect would have been anti-dilutive.