NOTE 7. NET INCOME PER SHARE During the quarter ended December 27, 1997, the Company adopted the Financial Accounting Standards Board's Statement No. 128 (FASB 128), "Earnings per Share." The new standard required the Company to change the method used to compute net income per share and to restate all prior periods. The new requirement includes a calculation of "basic" net income per share, which excludes the dilutive effect of stock options. Basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. In computing diluted net income per share, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options. Diluted earnings per share is computed using the weighted average common and dilutive common equivalent shares outstanding, plus other dilutive shares which are not common equivalent shares. The computation of basic net income per share for all years presented is derived from the information on the face of the income statement, and there are no reconciling items in either the numerator or denominator. Additionally, there are no reconciling items in the numerator used to compute diluted net income per share. The total shares used in the denominator of the diluted net income per share calculation includes 6,269,000, 6,859,000 and 7,863,000 incremental common shares attributable to outstanding options for fiscal years 1998, 1997 and 1996, respectively. The shares issuable upon conversion of long-term debt to equity, approximately 4.9 million shares, were not included in the calculation of diluted net income per share as their inclusion would have had an anti-dilutive effect for all periods presented. In addition, outstanding options to purchase approximately 1.9 million, 1.0 million and 0.6 million shares, for the fiscal years 1998, 1997 and 1996, respectively, under the Company's Stock Option Plan were not included in the treasury stock calculation to derive diluted income per share as their inclusion would have had an anti-dilutive effect. |