Basis of presentation Software AG's consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as promulgated by the International Accounting Standards Board (IASB). The IAS/IFRSs applicable as of December 31, 2006 were observed, as were the corresponding interpretations of the International Financial Reporting Interpretations Committee (IFRIC - formerly SIC). The same accounting policies have been applied as in the 2006 financial statements. Therefore, the accounting policies are not explained in detail in these quarterly financial statements. These quarterly financial statements have been prepared in accordance with IAS 34, Interim Financial Statements.
The consolidated financial statements of Software AG are expressed in thousands of euros unless otherwise stated.
There were no changes in the consolidated group compared to December 31, 2006.
Earnings per share were calculated by dividing net income for the period attributable to Software AG's shareholders by the weighted average number of shares outstanding during the reporting period and have been presented accordingly. Software AG has only issued common shares. In the first quarter of 2007, the weighted average number of shares amounted to 28,276,249. In 2006, the weighted average number of shares was 28,084,763 (annual average).
All three criteria for exercising options as set out in the first stock option plan for members of the Executive Board, officers, and other employees were met in the first quarter of 2007. The 6,750 options outstanding under this stock option plan were exercised during the first quarter. No other options are available for exercise from this plan.
The two criteria for exercising stock options under the second stock option plan were met in fiscal 2006: Sales increased by more than 10 percent over the previous year, and the return on sales was 23 percent. As a result 320,317 stock options from this plan were exercised in the first quarter of 2007.
Exercise of the options increased the total number of shares by 327,067.
Another 130,512 stock options could be exercised in fiscal 2007 from the second stock option plan. The diluted earnings per share were thus calculated for these potential shares using the treasury stock method and presented in the quarterly financial statements. Diluted earnings per share were computed by dividing net income for the period attributable to Software AG's shareholders by the number of shares in issue and the exercisable stock options.