Note 2. Net Income Per Share of Class A and Class B Common Stock

We compute net income per share of Class A and Class B common stock using the two-class method. Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of stock options, warrants issued under the TSO program, and restricted stock units. The dilutive effect of outstanding stock options, warrants, and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting. Further, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock (in this case the right of our Class A common stock to receive an equal dividend to any declared on our Class B common stock) must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our board of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as we assume the conversion of Class B common stock in the computation of the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation.

The following table sets forth the computation of basic and diluted net income per share of Class A and Class B common stock (in millions, except share amounts which are reflected in thousands and per share amounts):


	Year Ended December 31,
	2010					2011					2012
	Class A		Class B			Class A		Class B			Class A			Class B
Basic net income (loss) per share:
Numerator
Allocation of undistributed earnings—continuing operations	$	6,569	$	1,936		$	7,658	$	2,079		$	8,641		$	2,147
Allocation of undistributed earnings—discontinued operations		0		0			0		0			(41	)		(10	)
Total	$	6,569	$	1,936		$	7,658	$	2,079		$	8,600		$	2,137
Denominator
Weighted-average common shares outstanding		246,168		72,534			253,862		68,916			262,078			65,135

Number of shares used in per share computation		246,168		72,534			253,862		68,916			262,078			65,135

Basic net income (loss) per share
Continuing operations	$	26.69	$	26.69		$	30.17	$	30.17		$	32.97		$	32.97
Discontinued operations		0		0			0		0			(0.16	)		(0.16	)

Basic net income per share	$	26.69	$	26.69		$	30.17	$	30.17		$	32.81		$	32.81

Diluted net income per share:
Numerator
Allocation of undistributed earnings for basic computation—continuing operations	$	6,569	$	1,936		$	7,658	$	2,079		$	8,641		$	2,147
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares		1,936		0			2,079		0			2,147			0
Reallocation of undistributed earnings to Class B shares		0		(26	)		0		(27	)		0			(31	)

Allocation of undistributed earnings—continuing operations	$	8,505	$	1,910		$	9,737	$	2,052		$	10,788		$	2,116

Allocation of undistributed earnings for basic computation—discontinued operations	$	0	$	0		$	0	$	0		$	(41	)	$	(10	)
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares		0		0			0		0			(10	)		0
Reallocation of undistributed earnings to Class B shares		0		0			0		0			0			0

Allocation of undistributed earnings—discontinued operations	$	0	$	0		$	0	$	0		$	(51	)	$	(10	)

Denominator
Number of shares used in basic computation		246,168		72,534			253,862		68,916			262,078			65,135
Weighted-average effect of dilutive securities
Add:
Conversion of Class B to Class A common shares outstanding		72,534		0			68,916		0			65,135			0
Employee stock options, including warrants issued under Transferable Stock Option program		3,410		71			2,958		46			2,944			34
Restricted stock units		1,139		0			1,478		0			2,148			0

Number of shares used in per share computation		323,251		72,605			327,214		68,962			332,305			65,169

Diluted net income (loss) per share:
Continuing operations		26.31		26.31			29.76		29.76			32.46			32.46
Discontinued operations		0.00		0.00			0.00		0.00			(0.15	)		(0.15	)

Diluted net income per share	$	26.31	$	26.31		$	29.76	$	29.76		$	32.31		$	32.31

The net income per share amounts are the same for Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.