Earnings per Share (EPS) and Common Stock

EPS

Basic EPS is calculated by dividing net income by the weighted average number of shares outstanding during the period. Unvested restricted stock, although legally issued and outstanding, is not considered outstanding for purposes of calculating basic EPS. Diluted EPS is calculated by dividing net income by the weighted average number of shares outstanding plus the dilutive effect, if any, of outstanding stock options, restricted shares and RSUs using the treasury stock method. The calculation of the dilutive effect of outstanding equity awards under the treasury stock method includes consideration of proceeds from the assumed exercise of stock options, unrecognized compensation expense and any tax benefits as additional proceeds.



	Three months ended
Calculation of Basic and Diluted EPS	January 3, 2015		December 28, 2013
	(in thousands, except per share data)
Net income	$	30,284	$	39,657
Weighted average shares outstanding—Basic	115,341		118,933
Dilutive effect of employee stock options, restricted shares and restricted stock units	1,686		2,167
Weighted average shares outstanding—Diluted	117,027		121,100
Earnings per share—Basic	$	0.26	$	0.33
Earnings per share—Diluted	$	0.26	$	0.33

RSUs of 0.4 million were outstanding during the first three months of 2014 but were not included in the calculation of diluted EPS because the share impact of the assumed proceeds related to the weighted unamortized compensation expense exceeded the weighted average RSUs outstanding. These RSUs were excluded from the computation of diluted EPS as the effect would have been anti-dilutive.

Common Stock Repurchases

Our Articles of Organization authorize us to issue up to 500 million shares of our common stock. Our Board of Directors had authorized us to repurchase up to $100 million worth of shares with cash from operations in the period October 1, 2013 through September 30, 2014. On August 4, 2014, our Board of Directors authorized us to repurchase up to an additional $600 million of our common stock from August 4, 2014 through September 30, 2017. We did not repurchase any shares in the first quarter of 2014.

On August 14, 2014, we entered into an accelerated share repurchase (“ASR”) agreement with a major financial institution (“Bank”). The ASR allowed us to buy a large number of shares immediately at a purchase price determined by an average market price over a period of time. Under the ASR, we agreed to purchase $125 million of our common stock, in total, with an initial delivery to us in August 2014 of 2.3 million shares (“Initial Shares”), which represented the number of shares at the current market price equal to 70% of the total fixed purchase price of $125 million. The remainder of the total purchase price of $37.5 million reflected the value of the stock held by the Bank pending final settlement and, accordingly, was recorded as a reduction to additional paid-in capital in 2014. We settled the ASR in December 2014 and the Bank delivered to us 1.1 million shares. All shares of our common stock repurchased are automatically restored to the status of authorized and unissued.

Prior to settlement, we reflected the unsettled portion of the ASR ($37.5 million) as a forward contract indexed to our common stock. The forward contract met all of the applicable criteria for equity classification, and, therefore, was not accounted for as a derivative instrument.