| 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 Thirty-nine weeks ended
September 24,
September 26,
September 24,
September 26,
2016 2015 2016 2015
(in thousands, except per share data)
(in thousands, except per share data)
Net Income $ 31,530 $ 38,624 $ 65,183 $ 82,299
Allocation of net income for basic:
Class A Common Stock $ 22,841 $ 28,286 $ 47,465 $ 59,963
Class B Common Stock 8,529 10,159 17,390 21,951
Unvested participating shares 160 179 328 385
$ 31,530 $ 38,624 $ 65,183 $ 82,299
Weighted average number of shares for basic:
Class A Common Stock 9,018 9,655 9,191 9,667
Class B Common Stock* 3,367 3,467 3,367 3,539
Unvested participating shares 63 61 64 62
12,448 13,183 12,622 13,268
Net income per share for basic:
Class A Common Stock $ 2.53 $ 2.93 $ 5.16 $ 6.20
Class B Common Stock $ 2.53 $ 2.93 $ 5.16 $ 6.20
* Change in Class B Common Stock
resulted from the conversion of 100,000 shares to Class A
Common Stock on October 26, 2015 and 150,000 shares to
Class A common Stock on May 6, 2015, with the thirteen
and thirty-nine 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
September 24, 2016 September 26, 2015
Earnings to Common EPS Earnings to Common EPS
(in thousands,
except per share data)
As reported - basic $ 22,841 9,018 $ 2.53 $ 28,286 9,655 $ 2.93
Add: effect of dilutive potential common shares
Share-based awards
— 256
— 385
Class B Common Stock 8,529 3,367 10,159 3,467
Net effect of unvested participating shares 3
— 5
—
Net income per common share - diluted $ 31,373 12,641 $ 2.48 $ 38,450 13,507 $ 2.85
Thirty-nine weeks ended
September 24, 2016 September 26, 2015
Earnings to Common EPS Earnings to Common EPS
(in thousands,
except per share data)
As reported - basic $ 47,465 9,191 $ 5.16 $ 59,963 9,667 $ 6.20
Add: effect of dilutive potential common shares
Share-based awards
— 295
— 396
Class B Common Stock 17,390 3,367 21,951 3,539
Net effect of unvested participating shares 7
— 11
—
Net income per common share - diluted $ 64,862 12,853 $ 5.05 $ 81,925 13,602 $ 6.02
During the thirteen and thirty-nine weeks ended September 24,
2016, weighted-average stock options to purchase approximately
740,000 and 704,000 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 thirty-nine weeks ended September 26, 2015,
weighted-average stock options to purchase approximately 17,000 and
10,000 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 35,000 and 37,000
shares of Class A Common Stock were outstanding as of
September 24, 2016 and September 26, 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 35,000 shares of
Class A Common Stock that were excluded from computing diluted
net income per common share as of September 24, 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 5,000 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 15,000
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 thirty-nine weeks ended September 24, 2016. Service-based
stock options to purchase 27,000 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 thirty-nine weeks ended
September 24, 2016. |
