Net Income Per Share

The following is a reconciliation of the denominator of the basic and diluted net income per share computations for the periods presented:



	Three Months Ended				Six Months Ended
	July 30,		July 31,		July 30,		July 31,
	2017		2016		2017		2016
	(In millions, except per share data)
Numerator:
Net income	$	583	$	261	$	1,091	$	469
Denominator:
Basic weighted average shares	597		534		595		536
Dilutive impact of outstanding securities:
Equity awards	26		26		26		23
1% Convertible Senior Notes	4		43		9		37
Warrants issued with the 1% Convertible Senior Notes	6		31		7		24
Diluted weighted average shares	633		634		637		620
Net income per share:
Basic (1)	$	0.98	$	0.49	$	1.83	$	0.88
Diluted (2)	$	0.92	$	0.41	$	1.71	$	0.76
Equity awards excluded from diluted net income per share because their effect would have been anti-dilutive	—		—		1		2


(1)	Calculated as net income divided by basic weighted average shares.


(2)	Calculated as net income divided by diluted weighted average shares.

The 1.00% Convertible Senior Notes, or the Convertible Notes, are included in the calculation of diluted net income per share. The Convertible Notes have a dilutive impact on net income per share if our average stock price for the reporting period exceeds the adjusted conversion price of $20.0480 per share. The warrants associated with our Convertible Notes, or the Warrants, outstanding are also included in the calculation of diluted net income per share. The Warrants have a dilutive impact on net income per share if our average stock price for the quarter exceeds the adjusted strike price of $26.9876 per share. All outstanding Warrants were terminated during the second quarter of fiscal year 2018.

For the second quarter and first half of fiscal year 2018, our average stock price was $144.57 and $124.89, respectively, which exceeded both the adjusted conversion price and the adjusted strike price, causing the Convertible Notes and the Warrants to have a dilutive impact for these periods.

The denominator for diluted net income per share does not include any effect from the convertible note hedge transactions, or the Note Hedges, that we entered into concurrently with the issuance of the Convertible Notes, as this effect would be anti-dilutive. In the event of conversion of the Convertible Notes, the shares delivered to us under the Note Hedges will offset the dilutive effect of the shares that we would issue under the Convertible Notes.

In the fourth quarter of fiscal year 2017, we entered into an agreement to terminate 63 million Warrants and, in consideration, we delivered a total of 48 million shares of common stock to the counterparty bank. In the second quarter of fiscal year 2018, we entered into a second agreement to terminate the remaining 12 million Warrants outstanding and, in consideration, we delivered a total of 10 million shares of common stock to the counterparty bank.

Please refer to Note 11 of these Notes to Condensed Consolidated Financial Statements for additional discussion regarding the Convertible Notes, Note Hedges, and Warrants.