This excerpt taken from the DTV 10-Q filed May 10, 2007.
Note 10: Earnings Per Common Share
We compute Basic Earnings Per Common Share, or EPS, by dividing net income by the weighted average number of common shares outstanding for the period.
Diluted EPS considers the effect of common equivalent shares, which consist primarily of common stock options and restricted stock units issued to employees. In the computation of diluted EPS under the treasury stock method, the amount of assumed proceeds from nonvested stock awards and unexercised stock options includes the amount of compensation cost attributable to future services not yet recognized, proceeds from the exercise of the options, and the incremental income tax benefit or liability as if the awards were distributed during the period. We exclude common equivalent shares from the computation in loss periods as their effect would be antidilutive and we exclude common stock options from the computation of diluted EPS when their exercise price is greater than the average market price of our common stock. The number of common stock options excluded from the computation of diluted EPS because the options' exercise prices were greater than the average market price of our common stock were as follows: 34.5 million options for the three months ended March 31, 2007, and 66.0 million options for the three months ended March 31, 2006.
The following table sets forth comparative information regarding common shares outstanding:
The reconciliation of the amounts used in the basic and diluted EPS computation is as follows: