This excerpt taken from the CHH 10-Q filed May 7, 2009.
Basis of Presentation
As discussed in Note 1 of the accompanying consolidated financial statements, the Company adopted FASB Staff Position Emerging Issues Task Force No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1). FSP EITF 03-6-1 clarified that all share-based payment awards that contain rights to non-forfeitable dividends participate in undistributed earnings with common shareholders. Therefore, awards of this nature are considered participating securities and the two-class method of computing basic and diluted earnings per share must be applied rather than the treasury stock method. In addition, FSP EITF 03-6-1 requires that all prior period earnings per share data presented be adjusted retrospectively to conform to the provisions of FSP EITF 03-6-1.
The Companys outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and as a result, the Company applied this guidance in the first quarter of 2009. The two-class method of calculating earnings per share is more dilutive to both basic and diluted shares outstanding than the previously utilized treasury stock method. In accordance with FSP EITF 03-6-1, the Company has also retrospectively adjusted is basic and diluted shares outstanding for the three months ended March 31, 2008 under the two-class method which resulted in a reduction of the Companys diluted earnings per share from $0.30 to $0.29 per share while basic earnings per share for the three months ended March 31, 2008 remain unchanged. Additionally, based on the implementation of FSP EITF 03-6-1, basic and diluted earnings per share for the year ended December 31, 2008 were reduced from $1.62 to $1.61 and $1.60 to $1.59 per share, respectively.