7. Earnings and Dividends per Share

The computational components of basic and diluted earnings per share for the three month periods ended March 31, 2012 and 2011 are below (shares and dollars in thousands except per share amounts).


	For the three month period ended March 31, 2012
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	2,045		14,527	$	0.14
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		211
Subordinated convertible promissory notes		86		2,390		(0.02	)

Diluted earnings and earnings per share	$	2,131		17,128	$	0.12


	For the three month period ended March 31, 2011
	Numerator (Income)		Denominator (Shares)		Per Share Amount
Basic net income and earnings per share	$	1,258		14,314	$	0.09
Effect of dilutive securities and notes:
Common stock equivalents arising from stock options and employee stock purchase plan		—		110
Subordinated convertible promissory notes		95		2,669		(0.01	)

Diluted earnings and earnings per share	$	1,353		17,093	$	0.08

Options and warrants included in the computation of diluted earnings per share are so included on the treasury stock method. Options and warrants to purchase 0.4 million as of March 31, 2012 and 2011, were not included in the computation of diluted earnings per share due to their having an anti-dilutive effect. Pursuant to the if-converted method, diluted earnings per share as of March 31, 2012 includes a $86,000 after tax addback of interest expense to earnings and 2.4 million additional shares related to the assumed conversion of the convertible Investor Notes described in Note 6. Diluted earnings per share as of March 31, 2011 includes a $95,000 after tax addback of interest expense and 2.7 million additional shares related to the assumed conversion of the convertible Investor Notes.

Holders of restricted stock awards participate in nonforfeitable dividend rights on a one-for-one basis with holders of common stock. Holders of these awards are not obligated to share in losses of the Company. Therefore, these share awards are included in the computation of basic earnings per share during periods of net income using the two-class method, but are excluded from such computation in periods of net loss. Should the Company declare a dividend on its common stock, the related dividend on shares of unvested restricted stock that are not expected to vest would be recorded as additional compensation expense and therefore excluded from the two-class method computations; however, there were no non-vested restricted share awards outstanding for the three months ended March 31, 2012 or March 31, 2011. Undistributed earnings included in the two-class method computations are allocated equally to each share of common stock outstanding, including all shares of unvested restricted common shares.

Once a restricted stock award vests, it is included in the computation of weighted average shares outstanding for purposes of basic and diluted earnings (loss) per share.

The Company declared and paid on March 30, 2012 to common shareholders a quarterly dividend of $0.035 per share compared to $0 in the same period in 2011. The Company declared and paid on September 30, 2011 to common shareholders its first ever quarterly dividend of $0.025 per share, and a $0.025 dividend was paid to common shareholders on December 30, 2011. The dividend policy and the payment of cash dividends under that policy are subject to the Board of Director's continuing determination that the dividend policy and the declaration of dividends are in the best interest of the Company's shareholders. Future dividends and the dividend policy may be changed or cancelled at the Company's discretion at any time. Payment of dividends is also subject to the continuing consent of our lender under our Bank Facility.