| 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 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 25,
June 27,
June 25,
June 27,
2016 2015 2016 2015
(in thousands, except per share data)
(in thousands, except per share data)
Net Income $ 26,621 $ 29,932 $ 33,653 $ 43,675
Allocation of net income for basic:
Class A Common Stock $ 19,375 $ 21,870 $ 24,567 $ 31,740
Class B Common Stock 7,107 7,923 8,916 11,729
Unvested participating shares 139 139 170 206
$ 26,621 $ 29,932 $ 33,653 $ 43,675
Weighted average number of shares for basic:
Class A Common Stock 9,181 9,748 9,278 9,673
Class B Common Stock* 3,367 3,532 3,367 3,575
Unvested participating shares 66 62 64 63
12,614 13,342 12,709 13,311
Net income per share for basic:
Class A Common Stock $ 2.11 $ 2.24 $ 2.65 $ 3.28
Class B Common Stock $ 2.11 $ 2.24 $ 2.65 $ 3.28
* Change in Class B Common Stock
resulted from the conversion of 150,000 shares to Class A
Common Stock on May 6, 2015 and 100,000 shares to Class A
Common Stock on October 26, 2015, with the thirteen and
twenty-six week number of shares reflecting the weighted average
for the periods.
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 25, 2016 June 27, 2015
Earnings to Common EPS Earnings to Common EPS
(in thousands,
except per share data)
As reported—basic $ 19,375 9,181 $ 2.11 $ 21,870 9,748 $ 2.24
Add: effect of dilutive potential common shares
Share-based awards
— 282
— 387
Class B Common Stock 7,107 3,367 7,923 3,532
Net effect of unvested particpating shares 3
— 4
—
Net income per common share—diluted $ 26,485 12,830 $ 2.06 $ 29,797 13,667 $ 2.18
Twenty-six weeks ended
June 25, 2016 June 27, 2015
Earnings to Common EPS Earnings to Common EPS
(in thousands,
except per share data)
As reported—basic $ 24,567 9,278 $ 2.65 $ 31,740 9,673 $ 3.28
Add: effect of dilutive potential common shares
Share-based awards
— 314
— 402
Class B Common Stock 8,916 3,367 11,729 3,575
Net effect of unvested particpating shares 4
— 6
—
Net income per common share—diluted $ 33,487 12,959 $ 2.58 $ 43,475 13,650 $ 3.18
During the thirteen and twenty-six weeks ended June 25, 2016,
weighted-average stock options to purchase approximately 737,000
and 695,000 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 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. Additionally, performance-based stock
options to purchase 36,000 and 37,000 shares of Class A Common
Stock were outstanding as of June 25, 2016 and June 27,
2015, 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 36,000 shares of
Class A Common Stock that were excluded from computing diluted
net income per common share as of June 25, 2016, 30,000 shares
were granted in 2016 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 2016 to 2023. The
remaining 6,000 shares were granted in 2016 to executive officers
and the vesting of these shares requires annual depletions to
attain various thresholds during 2016.
Furthermore, performance-based stock options to purchase 14,742
shares of Class A Common Stock were not included in computing
diluted income per share because the performance criteria of these
stock options were not met and the options were cancelled during
the twenty-six weeks ended June 25, 2016. Service-based stock
options to purchase 15,772 shares of Class A Common Stock were
not included in computing diluted income per share because the
option holders terminated employment prior to vesting and the
options were cancelled during the twenty-six weeks ended
June 25, 2016. |
