Earnings Per Share

6 Months Ended

Jul. 03, 2011

6. Earnings Per Share:

Basic earnings per share is computed by dividing net earnings by the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period, plus the net incremental shares that would be issued using the treasury stock method assuming dilutive outstanding stock options were exercised, except when anti-dilutive. The computation of diluted earnings per share excludes stock options with an exercise price in excess of the average market price as they are anti-dilutive. In calculating diluted earnings per share, the dilutive effect of stock options is computed using the average market price for the respective period.

The following table shows a reconciliation of weighted average shares (in thousands):

	Three Months Ended				Six Months Ended
	7/3/11		7/4/10		7/3/11		7/4/10
Weighted average shares outstanding		4,348		4,301		4,342		4,300
Dilutive effect of stock options outstanding,
using the treasury stock method		265		149		286		116
Diluted weighted average shares outstanding		4,613		4,450		4,628		4,416

During the three and six months ended July 4, 2010, stock options to purchase 53,415 and 138,415, respectively, common shares were not included in the computation of "Diluted Earnings per Share" because their inclusion would be anti-dilutive.

- Definition

The entire disclosure for earnings per share.

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VALPEY FISHER CORP 10-Q