Net Income per Share | 9 Months Ended |
Sep. 27, 2014 |
Net Income per Share | ' |
C. | Net Income per Share | | | | | | | | | | | | | | | | | | | | | | | |
The Company calculates net income per share using the two-class method which requires the Company to allocate net income to its Class A Common Shares, Class B Common Shares and unvested share-based payment awards that participate in dividends with common stock, in the calculation of net income per share. |
The Company’s Class B Common Stock is not listed for trading. Each share of the Class B Common Stock is freely convertible into one share of Class A Common Stock, upon request of any Class B holder, and participates equally in dividends. |
The Company’s unvested share-based payment awards include unvested shares (1) issued under the Company’s investment share purchase program which permits employees who have been with the Company for at least one year to purchase shares of Class A Common Stock and to purchase those shares at a discount from market value after two years of employment, and (2) awarded as restricted stock awards at the discretion of the Company’s Board of Directors. The investment shares and restricted stock awards generally vest over five years in equal number of shares. The unvested shares participate equally in dividends. See Note J for a discussion of the current year unvested stock awards and issuances. |
Included in the computation of net income per diluted common share are dilutive outstanding stock options that are vested or expected to vest. At its discretion, the Board of Directors grants stock options to senior management and certain key employees. The terms of the employee stock options are determined by the Board of Directors at the time of grant. To date, stock options granted to employees vest over various service periods and/or based on the attainment of certain performance criteria and generally expire after ten years. The Company also grants stock options to its non-employee directors upon election or re-election to the Board of Directors. The number of option shares granted to non-employee directors is calculated based on a defined formula and these stock options vest immediately upon grant and expire after ten years. |
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Net Income per Common Share - Basic |
The following table sets forth the computation of basic net income per share using the two-class method: |
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| | Thirteen weeks ended | | | Thirty-nine weeks ended | | | | | | | | | |
| | September 27, | | | September 28, | | | September 27, | | | September 28, | | | | | | | | | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | | | | | |
| | (in thousands, except per share data) | | | | | | | | | |
Net Income | | $ | 37,926 | | | $ | 25,686 | | | $ | 71,669 | | | $ | 52,313 | | | | | | | | | |
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Allocation of net income for basic: | | | | | | | | | | | | | | | | | | | | | | | | |
Class A Common Stock | | $ | 26,878 | | | $ | 17,478 | | | $ | 50,348 | | | $ | 35,511 | | | | | | | | | |
Class B Common Stock | | | 10,833 | | | | 8,024 | | | | 20,919 | | | | 16,420 | | | | | | | | | |
Unvested participating shares | | | 215 | | | | 184 | | | | 402 | | | | 382 | | | | | | | | | |
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| | $ | 37,926 | | | $ | 25,686 | | | $ | 71,669 | | | $ | 52,313 | | | | | | | | | |
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Weighted average number of shares for basic: | | | | | | | | | | | | | | | | | | | | | | | | |
Class A Common Stock | | | 9,248 | | | | 8,730 | | | | 9,148 | | | | 8,734 | | | | | | | | | |
Class B Common Stock* | | | 3,727 | | | | 4,007 | | | | 3,801 | | | | 4,039 | | | | | | | | | |
Unvested participating shares | | | 74 | | | | 92 | | | | 73 | | | | 94 | | | | | | | | | |
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| | | 13,049 | | | | 12,829 | | | | 13,022 | | | | 12,867 | | | | | | | | | |
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Net income per share for basic: | | | | | | | | | | | | | | | | | | | | | | | | |
Class A Common Stock | | $ | 2.91 | | | $ | 2 | | | $ | 5.5 | | | $ | 4.07 | | | | | | | | | |
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Class B Common Stock | | $ | 2.91 | | | $ | 2 | | | $ | 5.5 | | | $ | 4.07 | | | | | | | | | |
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* | Change in Class B Common Stock resulted from the conversion of 135,000 shares to Class A Common Stock on February 18, 2014 and 100,000 shares to Class A Common Stock on May 7, 2014, with the 39-week number of shares reflecting the weighted average for the period. | | | | | | | | | | | | | | | | | | | | | | | |
Net Income per Common Share - Diluted |
The Company calculates diluted net income per share for common stock using the more dilutive of (1) the treasury stock method, or (2) the two-class method, which assumes the participating securities are not exercised. |
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The following table sets forth the computation of diluted net income per share, assuming the conversion of all Class B Common Stock into Class A Common Stock and using the two-class method for unvested participating shares: |
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| | Thirteen weeks ended September 27, | | | Thirteen weeks ended September 28, | |
| | 2014 | | | 2013 | |
| | Earnings to | | | Common | | | EPS | | | Earnings to | | | Common | | | EPS | |
Common | Shares | Common | Shares |
Shareholders | | Shareholders | |
| | (in thousands, except per share data) | |
As reported - basic | | $ | 26,878 | | | | 9,248 | | | $ | 2.91 | | | $ | 17,478 | | | | 8,730 | | | $ | 2 | |
Add: effect of dilutive potential common shares | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based awards | | | — | | | | 520 | | | | | | | | — | | | | 761 | | | | | |
Class B Common | | | | | | | | | | | | | | | | | | | | | | | | |
Stock | | | 10,833 | | | | 3,727 | | | | | | | | 8,024 | | | | 4,007 | | | | | |
Net effect of unvested participating shares | | | 7 | | | | — | | | | | | | | 10 | | | | — | | | | | |
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Net income per common share - diluted | | $ | 37,718 | | | | 13,495 | | | $ | 2.79 | | | $ | 25,512 | | | | 13,498 | | | $ | 1.89 | |
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| | Thirty-nine weeks ended September 27, | | | Thirty-nine weeks ended September 28, | |
| | 2014 | | | 2013 | |
| | Earnings to | | | Common | | | EPS | | | Earnings to | | | Common | | | EPS | |
Common | Shares | Common | Shares |
Shareholders | | Shareholders | |
| | (in thousands, except per share data) | |
As reported - basic | | $ | 50,348 | | | | 9,148 | | | $ | 5.5 | | | $ | 35,511 | | | | 8,734 | | | $ | 4.07 | |
Add: effect of dilutive potential common shares | | | | | | | | | | | | | | | | | | | | | | | | |
Share-based awards | | | — | | | | 523 | | | | | | | | — | | | | 715 | | | | | |
Class B Common | | | | | | | | | | | | | | | | | | | | | | | | |
Stock | | | 20,919 | | | | 3,801 | | | | | | | | 16,420 | | | | 4,039 | | | | | |
Net effect of unvested participating shares | | | 16 | | | | — | | | | | | | | 20 | | | | — | | | | | |
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Net income per common share - diluted | | $ | 71,283 | | | | 13,472 | | | $ | 5.29 | | | $ | 51,951 | | | | 13,488 | | | $ | 3.85 | |
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There were no anti-dilutive shares of Class A Common Stock outstanding during the thirteen and thirty-nine weeks ended September 27, 2014. There were no anti-dilutive shares of Class A Common Stock outstanding during the thirteen weeks ended September 28, 2013. During the thirty-nine weeks ended September 28, 2013 weighted-average stock options to purchase approximately 15,000 shares of Class A Common Stock were outstanding but not included in computing diluted income per common share because their effects were anti-dilutive. Additionally, performance-based stock options to purchase 42,000 and 86,000 shares of Class A Common Stock were outstanding as of September 27, 2014 and September 28, 2013, respectively, but not included in computing diluted income per common share because the performance criteria of these stock options was not met as of the end of the reporting period. |
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Of the performance-based stock options to purchase 42,000 shares of Class A Common Stock that were excluded from computing diluted net income per common share as of September 28, 2014, 30,000 shares were granted in 2009 to two key employees and 5,000 shares were granted in 2013 to one key employee. The vesting of these shares requires annual depletions, or sales by distributors to retailers, of certain of the Company’s brands to attain various thresholds during the period from 2014 to 2018. |
On January 1, 2008, the Company granted the Chief Executive Officer a stock option to purchase 753,864 shares of its Class A Common Stock, which vests over a five-year period, commencing on January 1, 2014, at the rate of 20% per year. The exercise price is determined by multiplying $42.00 by the aggregate change in the DJ Wilshire 5000 Index from and after January 1, 2008 through the close of business on the trading date next preceding each date on which the option is exercised. The exercise price will not be less than $37.65 per share and the excess of the fair value of the Company’s Class A Common Stock cannot exceed $70 per share over the exercise price. At September 27, 2014 and September 28, 2013, 603,092 shares and 753,864 shares of the stock option remained outstanding, respectively. If the outstanding shares at September 27, 2014 were exercised on that date, the exercise price would have been $150.19 per share. If the outstanding shares at September 28, 2013 were exercised on that date, the exercise price would have been $174.63 per share. |