Note 9 - Earnings Per Share

9 Months Ended

Oct. 01, 2011

9. Earnings Per Share

In June 2008, the FASB issued authoritative guidance which states that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method.

Effective December 28, 2008, the company adopted the authoritative guidance. The company’s unvested share-based payment awards, such as certain performance shares, restricted shares and restricted share units that contain non-forfeitable rights to dividends, meet the criteria of a participating security. The adoption changed the methodology of computing the company’s earnings per share to the two-class method from the treasury stock method. This change has not affected previously reported earnings per share, consolidated net earnings or net cash flows from operations. Under the two-class method, earnings are allocated between common stock and participating securities. The presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. As such, the company presents basic and diluted earnings per share for its one class of common stock.

The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. The company’s reported net earnings is reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stock shareholders for purposes of calculating earnings per share.

The dilutive effect of participating securities is calculated using the more dilutive of the treasury stock or the two-class method. The company has determined the two-class method to be the more dilutive. As such, the earnings allocated to common stock shareholders in the basic earnings per share calculation is adjusted for the reallocation of undistributed earnings to participating securities, as prescribed by the guidance, to arrive at the earnings allocated to common stock shareholders for calculating the diluted earnings per share.

The following table sets forth the computation of basic and diluted earnings per share under the two-class method:

	For the Three Months Ended						For the Nine Months Ended
(in thousands except per share amounts)	October 1, 2011			October 2, 2010			October 1, 2011			October 2, 2010

Net income as reported	$	24,939		$	23,338		$	71,786		$	59,085
Less: Distributed earnings available to participating securities		(6	)		—			(11	)		—
Less: Undistributed earnings available to participating securities		(68	)		129			(257	)		319
Numerator for basic earnings per share —
Undistributed and distributed earnings available to common shareholders	$	24,865		$	23,209		$	71,518		$	58,766
Add: Undistributed earnings allocated to participating securities		68			129			257			319
Less: Undistributed earnings reallocated to participating securities		(67	)		(127	)		(253	)		(315	)
Numerator for diluted earnings per share —
Undistributed and distributed earnings available to common shareholders	$	24,866		$	23,211		$	71,522		$	58,770
Denominator for basic earnings per share —
Weighted-average shares		22,000			21,968			22,023			21,945
Effect of dilutive securities:
Common stock equivalents		287			303			384			289
Numerator for basic earnings per share —
Adjusted for weighted-average shares & assumed conversions		22,287			22,271			22,407			22,234
Basic earnings per share	$	1.13		$	1.06		$	3.25		$	2.68
Diluted earnings per share	$	1.12		$	1.04		$	3.19		$	2.64