9. Earnings Per Share
Basic earnings per share is calculated by dividing net income by the weighted average number of shares outstanding for the reporting period. Diluted earnings per share is computed similarly, except that it reflects the potential dilutive impact that would occur if dilutive securities were exercised into common shares.
The Company has issued restricted stock awards which vest over a service period that ranges from three to five years. These awards contain rights to dividends or dividend equivalents. Awards containing such rights that are unvested are considered to be participating securities and would be included in the computation of earnings per share pursuant to the two-class method. Under the two-class method, earnings are allocated between the Company's common stockholders and participating securities. The application of the two-class method during the three and nine months ended September 30, 2011 and 2010 did not have a material impact on the earnings per share calculation.
The weighted average number of common shares used to compute basic and diluted net income per share was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
|
2011 |
|
2010 |
|
2011 |
|
2010 |
|
Weighted average basic common shares outstanding |
|
|
20,264,543 |
|
|
19,914,526 |
|
|
20,102,446 |
|
|
19,868,070 |
|
Potential common shares arising from stock options and restricted stock |
|
|
776,762 |
|
|
861,417 |
|
|
882,565 |
|
|
897,506 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares outstanding |
|
|
21,041,305 |
|
|
20,775,943 |
|
|
20,985,011 |
|
|
20,765,576 |
|
|
|
|
|
|
|
|
|
|
|
For the three months ended September 30, 2011 and 2010, potential common shares related to the assumed exercise of 89,660 and 585,616 stock options, respectively, were excluded from the dilutions calculation because the exercise price of those options was greater than the average market price of the common shares (anti-dilutive). For the nine months ended September 30, 2011 and 2010, potential common shares related to the assumed exercise of 89,660 and 105,528 stock options, respectively, were excluded from the diluted earnings per share calculation because the exercise price of those options was greater than the average market price of the common shares. For the three and nine months ended September 30, 2011 and 2010, potential common shares related to the unvested portion of performance awards of 74,435 and 40,256, respectively, were excluded from the denominator of the diluted earnings per share calculation because the underlying performance obligation was not met as of the end of those periods. |