Stockholders' Equity

9 Months Ended

Dec. 31, 2012

Stockholders' Equity

(7) Stockholders’ Equity

Earnings Per Share

The two-class method is utilized for the computation of earnings per share (EPS). The two-class method requires a portion of net income to be allocated to participating securities, which are unvested awards of share-based payments with non-forfeitable rights to receive dividends or dividend equivalents, if declared. Income allocated to these participating securities is excluded from net earnings allocated to common shares and was insignificant for the quarter and nine months ended December 31, 2011. There were no participating securities outstanding during the quarter and nine months ended December 31, 2012.

Basic earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed by dividing net income allocated to common shares by the weighted average number of common shares outstanding during the period, plus the dilutive effect of outstanding share-based awards and other dilutive securities using the treasury stock method.

The following table summarizes our basic and diluted EPS computations for the quarters and nine months ended December 31, 2012 and 2011:

	Quarter Ended				Nine Months Ended
	December 31,				December 31,
	2012		2011		2012		2011
	(In millions, except per share data)
Basic earnings per share:
Net earnings allocated to common shares	$	106.3	$	119.9	$	258.3	$	330.3
Weighted average number of common shares outstanding		149.7		167.2		155.8		172.0
Basic earnings per share	$	0.71	$	0.72	$	1.66	$	1.92
Diluted earnings per share:
Net earnings allocated to common shares	$	106.3	$	119.9	$	258.3	$	330.3
Weighted average number of common shares outstanding		149.7		167.2		155.8		172.0
Incremental shares from assumed conversions of share-based awards		2.9		2.3		3.1		3.2
Adjusted weighted average number of common shares outstanding		152.6		169.5		158.9		175.2
Diluted earnings per share	$	0.70	$	0.71	$	1.63	$	1.88

For the quarter and nine months ended December 31, 2012, 0.6 million and 1.2 million weighted average potential common shares, respectively, have been excluded from the calculation of diluted EPS as they were anti-dilutive. For the quarter and nine months ended December 31, 2011, 4.9 million and 1.8 million weighted average potential common shares, respectively, have been excluded from the calculation of diluted EPS as they were anti-dilutive.

Treasury Stock

Our Board of Directors has authorized a total of $6.0 billion to repurchase common stock under a common stock repurchase program, including a new $1 billion stock repurchase authorization approved in October 2012. On November 23, 2012, we entered into an accelerated share repurchase agreement (the ASR) to repurchase $750 million of our common stock under this program. Under the terms of the ASR, we paid $750 million to a financial institution and initially received 13.1 million shares of common stock, or 70% of the number of shares to be repurchased if such shares were repurchased at a price equal to the closing price of our common stock on November 23, 2012. The specific number of shares that we will ultimately repurchase under the ASR will be based generally on the daily discounted volume-weighted average share price of our common stock during the repurchase period, subject to other adjustments pursuant to the terms and conditions of the ASR. The ASR contemplates that the repurchase period will last no longer than approximately seven months from the execution of the agreement. At the completion of the repurchase period, we may be entitled to receive additional shares of our common stock from the financial institution or, under certain circumstances specified in the ASR, we may be required to deliver shares or make a cash payment (at our option) to the financial institution. Under the terms of the ASR, the maximum number of shares that could be delivered is 25.0 million.

The fair market value of the 13.1 million shares initially delivered was approximately $525.0 million and was included in treasury stock, reducing the weighted average number of basic and diluted common shares used to calculate EPS. The remaining $225.0 million was included in additional paid-in capital (APIC) and will be reclassified from APIC to treasury stock upon final settlement of the ASR. As of December 31, 2012, based on the daily discounted volume-weighted average price of our common stock since the effective date of the ASR, the financial institution would be required to deliver 5.6 million shares to us for the $225.0 million portion of the ASR that has not yet been settled. These shares were not included in the calculation of diluted weighted average common shares outstanding during the period because their effect was anti-dilutive.

During the quarter and nine months ended December 31, 2012, we repurchased a total of 14.3 million and 22.6 million shares, respectively, valued at $575.0 million and $925.0 million, respectively, under the Board authorizations. At December 31, 2012, approximately $700.2 million remains authorized in the stock repurchase program, which does not have an expiration date. During the quarter and nine months ended December 31, 2012, we repurchased 0.4 million and 0.9 million shares, respectively, for $18.1 million and $38.1 million, respectively, to satisfy employee tax withholding obligations upon the vesting of share-based awards.

Shareholder Rights Agreement

On May 12, 2012, our Board of Directors authorized and declared a dividend of one preferred share purchase right (a Right) for each outstanding common share through a shareholder rights agreement (the Rights Agreement). Each Right, once exercisable, represents the right to purchase one one-thousandth of a series B junior participating preferred share, par value $0.01, for $180, or an equivalent value of common shares determined at 50% of the then-current market price of BMC’s common stock, provided sufficient common shares are then unissued. The Rights become exercisable in the event any individual person or entity (including the ownership of their related affiliates) acquires 10% or more of the outstanding share capital of the Company without the approval of BMC’s Board of Directors, and until such time are inseparable from and trade with BMC’s common stock. The Rights have a de minimus fair value and are accounted for as a component of stockholders’ equity. The Rights Agreement expires May 11, 2013.