D. 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 comprise of unvested shares (1) issued under the Company’s investment share purchase program which permits employees who have been with the Company for at least two years to purchase shares of Class A Common Stock at a discount from market value, 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 L 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. See Note L for a discussion of the current year stock option grants.

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 29, 2012		September 24, 2011		September 29, 2012		September 24, 2011
	(in thousands, except per share data)
Net income	$	20,750	$	16,296	$	42,594	$	48,274

Allocation of net income for basic:
Class A Common Stock	$	13,974	$	11,121	$	28,648	$	33,189
Class B Common Stock		6,586		5,175		13,552		15,085
Unvested participating shares		190		—		394		—

	$	20,750	$	16,296	$	42,594	$	48,274
Weighted average number of shares for basic:
Class A Common Stock		8,715		8,825		8,683		9,036
Class B Common Stock		4,107		4,107		4,107		4,107
Unvested participating shares		118		—		119		—

		12,940		12,932		12,909		13,143
Net income per share for basic:
Class A Common Stock	$	1.60	$	1.26	$	3.30	$	3.67

Class B Common Stock	$	1.60	$	1.26	$	3.30	$	3.67

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 or converted.

The following tables set 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 29, 2012						Thirteen weeks ended September 24, 2011
	Earnings to Common Shareholders		Common Shares		EPS		Earnings to Common Shareholders		Common Shares		EPS
	(in thousands, except per share data)
As reported—basic	$	13,974		8,715	$	1.60	$	11,121		8,825	$	1.26

Add: effect of dilutive potential common shares
Share-based awards		—		630				—		718
Class B Common Stock		6,586		4,107				5,175		4,107

Net effect of unvested participating shares		9		—				—		—

Net income per common share—diluted	$	20,569		13,452	$	1.53	$	16,296		13,650	$	1.19


	Thirty-nine weeks ended September 29, 2012						Thirty-nine weeks ended September 24, 2011
	Earnings to Common Shareholders		Common Shares		EPS		Earnings to Common Shareholders		Common Shares		EPS
	(in thousands, except per share data)
As reported—basic	$	28,648		8,683	$	3.30	$	33,189		9,036	$	3.67

Add: effect of dilutive potential common shares
Share-based awards		—		646				—		725
Class B Common Stock		13,552		4,107				15,085		4,107

Net effect of unvested participating shares		19		—				—		—

Net income per common share—diluted	$	42,219		13,436	$	3.14	$	48,274		13,868	$	3.48

During the thirteen and thirty-nine weeks ended September 29, 2012, weighted-average stock options to purchase approximately 217,600 and 260,859 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 24, 2011, weighted-average stock options to purchase approximately 233,000 and 218,000 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 60,000 and 68,000 shares of Class A Common Stock were outstanding as of September 29, 2012 and September 24, 2011, respectively, but not included in computing diluted income per common share because the performance criteria of these stock options were not met as of the respective dates. Furthermore, performance-based stock options to purchase 4,550 shares of Class A Common Stock were not included in computing diluted income per common share because the performance criteria of these stock options were not met and the options were cancelled during the thirty-nine weeks ended September 29, 2012.

The performance-based stock options to purchase 60,000 shares that were excluded from computing diluted net income per common share because the performance criteria were not met as of September 29, 2012 were granted in 2009 to two key employees. The vesting of these shares requires annual depletions, or sales by wholesalers to retailers, of certain of the Company’s brands to attain various thresholds during the period from 2012 to 2018.