Note 2. Earnings and Dividends per Share

Basic earnings per share ("EPS") is calculated by dividing net income by the weighted average number of shares of common stock outstanding during the applicable period. Shares used in the diluted earnings per share calculation are based on the weighted average number of shares outstanding during the period increased by potentially dilutive common equivalent shares. Potentially dilutive common shares include stock options, stock subscribed under the HickoryTech Corporation Amended and Restated Employee Stock Purchase Plan ("ESPP"), retention stock awards and stock awarded under the Long-Term Executive Incentive Program ("LTEIP"). Dilution is determined using the treasury stock method. The company does not use the two-class method to report its earnings per share. The two-class method includes an earnings allocation formula that determines earnings per share for common stock and restricted stock issued under the LTEIP, which participate in dividends. However, the application of this method would result in an immaterial change in earnings per share and is therefore not presented.

	Three Months Ended March 31
(Dollars in thousands, except share and earnings per share amounts)	2013		2012

Net income	$	1,626	$	2,294

Weighted average shares outstanding		13,556,515		13,349,791
Stock options (dilutive only)		4,788		16,737
Stock subscribed (ESPP)		-		1,162
Retention awards		8,349		15,588
Stock subscribed (LTEIP)		8,777		22,079
Total dilutive shares outstanding		13,578,429		13,405,357

Earnings per share:
Basic and diluted	$	0.12	$	0.17

Dividends per share	$	0.145	$	0.14

Options to purchase 82,150 and 87,950 shares for the three months ended March 31, 2013 and 2012, respectively were not included in the computation of EPS, because their effect on earnings per share would have been anti-dilutive.

Cash dividends are based on the number of common shares outstanding at their respective record dates. The number of shares outstanding as of the record date for the first quarter of 2013 and 2012, respectively, are as follows:

Shares outstanding on record date		2013				2012
First quarter (February 15)			13,586,903				13,409,941

Dividends per share are based on the quarterly dividend per share as declared by the HickoryTech Board of Directors. HickoryTech paid dividends of $0.145 and $0.14 per share in the first quarter of 2013 and 2012, respectively. During the first three months of 2013 and 2012, shareholders have elected to reinvest $78,000 and $71,000, respectively, of dividends into HickoryTech common stock pursuant to the HickoryTech Corporation Dividend Reinvestment Plan.

In March 2013, we acquired and retired 52,647 shares of HickoryTech common stock.