Earnings Per Share

Basic earnings per share is determined using the weighted average number of common shares outstanding during the period. Diluted earnings per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, restricted stock units, and employee stock purchase plan shares) outstanding during the period. Applied’s net income has not been adjusted for any period presented for purposes of computing basic or diluted earnings per share due to the Company’s non-complex capital structure.



	Three Months Ended				Six Months Ended
	April 29, 2012		May 1, 2011		April 29, 2012		May 1, 2011
	(In millions, except per share amounts)
Numerator:
Net income	$	289	$	489	$	406	$	995
Denominator:
Weighted average common shares outstanding	1,289		1,320		1,294		1,322
Effect of dilutive stock options, restricted stock units and employee stock purchase plan shares	12		13		11		11
Denominator for diluted earnings per share	1,301		1,333		1,305		1,333
Basic and diluted earnings per share	$	0.22	$	0.37	$	0.31	$	0.75
Potentially dilutive securities	8		18		13		18

Potentially dilutive securities attributable to outstanding stock options and restricted stock units were excluded from the calculation of diluted net income per share because the combined exercise price, average unamortized fair value and assumed tax benefits upon the exercise of options and the vesting of restricted stock units were greater than the average market price of the Company’s shares, and therefore their inclusion would have been anti-dilutive.