Earnings Per Share

6 Months Ended

Jun. 30, 2011

2.	EARNINGS PER SHARE

We compute earnings per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Shares of our non-vested (restricted) stock are considered participating securities because these awards contain a non-forfeitable right to dividends irrespective of whether the awards ultimately vest. Under the two-class method, earnings per common share for our Common and Class B common stock is computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted-average number of shares of Common and Class B common stock outstanding for the period. In applying the two-class method, undistributed earnings are allocated to Common stock, Class B common stock and participating securities based on the weighted-average shares outstanding during the period.

Diluted earnings per share for our Common stock assumes the conversion of all of our Class B common stock into Common stock as of the beginning of the fiscal year and adjusts for the dilutive effects of outstanding stock options using the treasury stock method. As of June 30, 2011 and 2010, our outstanding Class B common stock was convertible into 2,854,093 and 2,866,881 shares of our Common stock, respectively.

The following table presents the calculation of basic and diluted earnings per common share for our Common and Class B common stock:


	Quarter Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Basic Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	36,023	$	35,045	$	43,523	$	38,878
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock		2,456		2,100		2,832		2,342

Earnings allocated to Watsco, Inc. shareholders	$	33,567	$	32,945	$	40,691	$	36,536

Weighted-average Common and Class B common shares outstanding for basic earnings per share		30,685,087		30,461,079		30,643,560		30,413,994
Basic earnings per share for Common and Class B Common stock	$	1.09	$	1.08	$	1.33	$	1.20
Allocation of earnings for Basic:
Common stock	$	30,445	$	29,844	$	36,901	$	33,092
Class B common stock		3,122		3,101		3,790		3,444

	$	33,567	$	32,945	$	40,691	$	36,536

Diluted Earnings per Share:
Net income attributable to Watsco, Inc. shareholders	$	36,023	$	35,045	$	43,523	$	38,878
Less: distributed and undistributed earnings allocated to non-vested (restricted) common stock		2,453		2,097		2,831		2,341

Earnings allocated to Watsco, Inc. shareholders	$	33,570	$	32,948	$	40,692	$	36,537

The diluted earnings per share calculation assumes the conversion of all of our Class B common stock into Common stock as of the beginning of the period; therefore, no allocation of earnings to Class B common stock is required.


Weighted-average Common and Class B common shares outstanding for basic earnings per share	30,685,087	30,461,079	30,643,560	30,413,994
Effect of dilutive stock options	85,208	108,445	88,973	123,142

Weighted-average Common and Class B common shares outstanding for diluted earnings per share	30,770,295	30,569,524	30,732,533	30,537,136


Diluted earnings per share for Common and Class B common stock		$	1.09			$	1.08			$	1.32			$	1.20


Anti-dilutive stock options not included above			3,297				84,000				3,050				117,561

- Definition

The entire disclosure for earnings per share.

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