Note 3 – Net Income Per Common Share

Basic and diluted net income or loss per common share for 2012 is presented in conformity with the single-class method, and for 2011 and 2010, respectively, is presented in conformity with the two-class method required for participating securities. Prior to the Company’s IPO, the Company had outstanding redeemable convertible preferred stock. The holder of the Company’s redeemable convertible preferred stock was entitled to receive cumulative dividends at the rate of 8% per annum, payable prior and in preference to any dividends on any shares of the Company’s common stock. In addition, in the event a dividend was paid on common stock, the holder of redeemable convertible preferred stock was entitled to a proportionate share of any such dividend as if it was a holder of common stock (on an as-if converted basis). The Company considered its redeemable preferred stock to be participating securities and, in accordance with the two-class method, earnings allocated to preferred stock in 2011 and 2010, respectively, have been excluded from the computation of basic and diluted net income or loss per common share for those years.

Basic net income per share is computed based on the weighted average number of common shares outstanding. Diluted net income per share is computed based on the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The following table presents the calculation of net income per basic and diluted share attributable to common shareholders:


	Year Ended December 31,
(in thousands, except share and per share amounts)	2012		2011			2010
Net Income	$	24,025	$	17,972		$	10,951
Less: dividends on redeemable convertible preferred stock		—		(4,179	)		(4,179	)
Less: undistributed earnings allocated to preferred shareholders		—		(4,507	)		(2,377	)

Net income attributable to common shareholders	$	24,025	$	9,286		$	4,395

Basic—weighted-average shares outstanding:		23,373,593		12,352,004			11,079,432
Effect of dilutive securities:
Employee stock options, warrants and other		1,070,072		1,587,068			1,972,026

Diluted—weighted-average shares outstanding:		24,443,665		13,939,072			13,051,458

Net income per share attributable to common shareholders:
Basic	$	1.03	$	0.75		$	0.40

Diluted	$	0.98	$	0.67		$	0.34

Weighted-average diluted shares for the years ended December 31, 2011 and 2010, respectively, excludes redeemable convertible preferred stock as it was anti-dilutive for the period.

The following table sets forth the calculation of unaudited pro forma net income per basic and diluted share which gives effect to the conversion of all outstanding shares of redeemable convertible preferred stock as if the conversion had occurred on January 1, 2010:


	Year Ended December 31,
(in thousands, except share and per share amounts)	2012		2011		2010
Net income attributable to common shareholders, as reported	$	24,025	$	9,286	$	4,395
Dividends on redeemable convertible preferred stock		—		4,179		4,179
Undistributed earnings allocated to preferred shareholders		—		4,507		2,377

Pro forma net income	$	24,025	$	17,972	$	10,951

Basic—weighted-average shares outstanding, as reported		23,373,593		12,352,004		11,079,432
Add: common shares from conversion of redeemable convertible preferred shares		—		5,991,790		5,991,790

Pro forma basic weighted average shares outstanding		23,373,593		18,343,794		17,071,222

Effect of dilutive securities:
Employee stock options, warrants and other		1,070,072		1,587,068		1,972,026

Pro forma diluted—weighted-average shares outstanding:		24,443,665		19,930,862		19,043,248

Pro forma net income per share attributable to common shareholders:
Basic	$	1.03	$	0.98	$	0.64

Diluted	$	0.98	$	0.90	$	0.58