Earnings Per Share

9 Months Ended

Sep. 24, 2011

Note D – Earnings Per Share

The following table represents the calculation of net earnings per common share:


	Third quarter				Year-to-Date
(In thousands, except per share amounts)	2011		2010		2011		2010

Basic Earnings Per Share
Numerator:
Net earnings available to common shareholders	$	91,659	$	32,044	$	47,705	$	26,890
Assumed distribution to participating securities		(11,892)		—		—		—

Assumed undistributed earnings available to common stock		79,767		32,044		47,705		26,890

Denominator:
Weighted-average shares outstanding		278,559		275,956		277,627		275,170

Basic earnings per share	$	0.29	$	0.12	$	0.17	$	0.10


Diluted Earnings Per Share
Numerator:
Net earnings attributable to Office Depot, Inc.	$	100,872	$	41,254	$	75,344	$	54,788

Denominator:
Weighted-average shares outstanding		278,559		275,956		277,627		275,170
Effect of dilutive securities:
Stock options and restricted stock		4,774		6,129		5,583		6,961
Redeemable preferred stock		73,703		73,703		73,703		73,667


Diluted weighted-average shares outstanding		357,036		355,788		356,913		355,798

Diluted earnings per share	$	0.28		N/A		N/A		N/A

Following the company's issuance of the redeemable preferred stock, basic earnings per share is computed after consideration of preferred stock dividends. Shares of the redeemable preferred stock have equal dividend participation rights with common stock. The company has never paid a dividend on common stock, but the participation provisions require application of the two-class method of computing earnings per share, unless that method is antidilutive. The first step in the Basic EPS calculation assumes distribution of earnings after preferred stock to all securities, based on their contractual rights. Because the redeemable preferred stock participates equally with common shares, without duplication, the calculation assumes proportional distribution to all securities. For the third quarter of 2011, Basic EPS for common shares is $0.29, all undistributed. Basic EPS for the redeemable preferred shares is also $0.29, composed of $0.13 distributed and $0.16 undistributed. The two-class method of calculating EPS is antidultive in all other periods presented.

The diluted EPS calculation under the two-class method includes two tests to determine the most dilutive. These tests, and the diluted EPS calculation which includes the dilutive impact of stock options and restricted stock under the treasury stock method and redeemable preferred stock under the if-converted method, result in diluted EPS for the third quarter of 2011 of $0.28. The diluted EPS calculation for all other periods presented was antidulitive. The share amounts have been presented for informational purposes.

The quarterly preferred stock dividends payable on April 1, 2010 through October 1, 2011 were paid in cash. Should the company pay dividends on preferred shares in-kind during future periods, the earnings per share attributable to preferred and common shareholders may be different.

Awards of options and nonvested shares representing approximately 16.0 million and 12.4 million additional shares of common stock were outstanding for the third quarter and year-to-date 2011, and 13.2 million and 13.5 million for the third quarter and year-to-date 2010, respectively, but were not included in the computation of diluted earnings per share because their effect would have been antidilutive. For purposes of calculating weighted average shares, no tax benefits have been assumed in jurisdictions with deferred tax valuation allowances.