| 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 Class A Common Stock has no voting rights, except
(1) as required by law, (2) for the election of
Class A Directors, and (3) that the approval of the
holders of the Class A Common Stock is required for
(a) certain future authorizations or issuances of additional
securities which have rights senior to Class A Common Stock,
(b) certain alterations of rights or terms of the Class A
or Class B Common Stock as set forth in the Articles of
Organization of the Company, (c) other amendments of the
Articles of Organization of the Company, (d) certain mergers
or consolidations with, or acquisitions of, other entities, and
(e) sales or dispositions of any significant portion of the
Company’s assets.
The Class B Common Stock has full voting rights, including the
right to (1) elect a majority of the members of the
Company’s Board of Directors and (2) approve all
(a) amendments to the Company’s Articles of
Organization, (b) mergers or consolidations with, or
acquisitions of, other entities, (c) sales or dispositions of
any significant portion of the Company’s assets, and
(d) equity-based and other executive compensation and other
significant corporate matters. 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 ranging from 20% to 40% below market value based on years
of employment starting 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 I 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.
Net Income per Common Share - Basic
The following table sets forth the computation of basic net income
per share using the two-class method:
Thirteen weeks ended Twenty-six weeks ended
June 27.
June 28,
June 27.
June 28,
2015 2014 2015 2014
(in thousands, except per share data)
(in thousands, except per share data)
Net Income $ 29,932 $ 25,428 $ 43,675 $ 33,743
Allocation of net income for basic:
Class A Common Stock $ 21,870 $ 17,935 $ 31,740 $ 23,600
Class B Common Stock 7,923 7,353 11,729 9,955
Unvested participating shares 139 140 206 188
$ 29,932 $ 25,428 $ 43,675 $ 33,743
Weighted average number of shares for basic:
Class A Common Stock 9,748 9,196 9,673 9,097
Class B Common Stock* 3,532 3,770 3,575 3,837
Unvested participating shares 62 72 63 73
13,342 13,038 13,311 13,007
Net income per share for basic:
Class A Common Stock $ 2.24 $ 1.95 $ 3.28 $ 2.59
Class B Common Stock $ 2.24 $ 1.95 $ 3.28 $ 2.59
* Change in Class B Common Stock
resulted from the conversion of 150,000 shares to Class A
Common Stock on May 6, 2015, with the 26-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.
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:
Thirteen weeks
ended June 27, Thirteen weeks
ended June 28,
2015 2014
Earnings
to Earnings
to
Common Common Common Common
Shareholders Shares EPS Shareholders Shares EPS
(in thousands,
except per share data)
As reported - basic $ 21,870 9,748 $ 2.24 $ 17,935 9,196 $ 1.95
Add: effect of dilutive potential common shares
Share-based awards
— 387
— 520
Class B Common Stock 7,923 3,532 7,353 3,770
Net effect of unvested particpating shares 4
— 5
—
Net income per common share - diluted $ 29,797 13,667 $ 2.18 $ 25,293 13,486 $ 1.88
Twenty-six weeks
ended June 27, Twenty-six weeks
ended June 28,
2015 2014
Earnings
to Earnings
to
Common Common Common Common
Shareholders Shares EPS Shareholders Shares EPS
(in thousands,
except per share data)
As reported - basic $ 31,740 9,673 $ 3.28 $ 23,600 9,097 $ 2.59
Add: effect of dilutive potential common shares
Share-based awards
— 402
— 527
Class B Common Stock 11,729 3,575 9,955 3,837
Net effect of unvested particpating shares 6
— 7
—
Net income per common share - diluted $ 43,475 13,650 $ 3.18 $ 33,562 13,461 $ 2.49
During the thirteen and twenty-six weeks ended June 27, 2015,
weighted-average stock options to purchase approximately 6,000 and
5,000 shares, respectively, of Class A Common Stock were
outstanding but not included in computing diluted income per common
share because their effects were anti-dilutive. During the thirteen
and twenty-six weeks ended June 28, 2014, weighted-average
stock options to purchase approximately 2,000 and 1,000 shares,
respectively, 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 37,000 and 47,000 shares of Class A Common
Stock were outstanding as of June 27, 2015 and June 28,
2014, 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.
Of the performance-based stock options to purchase 37,000 shares of
Class A Common Stock that were excluded from computing diluted
net income per common share as of June 27, 2015, 30,000 shares
were granted in 2009 to two key employees. 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 2015 to 2018. The
remaining 7,000 shares were granted in 2015 to executive officers
and the vesting of these shares requires annual depletions to
attain various thresholds during 2015.
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
June 27, 2015 and June 28, 2014, 452,319 shares and
603,092 shares of the stock option remained outstanding,
respectively. If the outstanding shares at June 27, 2015 were
exercised on that date, the exercise price would have been $167.62
per share. If the outstanding shares at June 28, 2014 were
exercised on that date, the exercise price would have been $152.33
per share. |
