Net Income per Share

9 Months Ended

Sep. 26, 2020

I. 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 the respective 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 O 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 and restricted stock that are vested or expected to vest. At its discretion, the Board of Directors grants stock options and restricted stock 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. In December 2018, the Employee Equity Incentive Plan was amended to permit the grant of restricted stock units. The restricted stock units generally vest over four years in equal number of shares. Each restricted stock unit represents an unfunded and

unsecured

right to receive one share of Class A Stock upon satisfaction of the vesting criteria. The unvested shares participate equally in dividends and are forfeitable. Prior to March 1, 2019, the Company granted restricted stock awards, generally vesting over five years in equal number of shares. 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 26,		September 28,		September 26,		September 28,
	2020		2019		2020		2019
	(in thousands, except per share data)				(in thousands, except per share data)
Net income	$	80,768	$	44,729	$	159,143	$	96,279

Allocation of net income for basic:
Class A Common Stock	$	65,074	$	33,776	$	126,146	$	71,761
Class B Common Stock		15,254		10,581		31,996		23,652
Unvested participating shares		440		372		1,001		866

	$	80,768	$	44,729	$	159,143	$	96,279
Weighted average number of shares for basic:
Class A Common Stock		9,846		9,136		9,663		8,797
Class B Common Stock*		2,308		2,862		2,451		2,899
Unvested participating shares		67		101		77		106

		12,221		12,099		12,191		11,802
Net income per share for basic:
Class A Common Stock	$	6.61	$	3.70	$	13.05	$	8.16

Class B Common Stock	$	6.61	$	3.70	$	13.05	$	8.16

*Change in Class B Common Stock resulted from the conversion of 145,000 shares to Class A Common Stock on December 13, 2019, 150,000 shares to Class A Common Stock on March 11, 2020 and 215,000 shares to Class A Common Stock on May 6, 2020 with the ending 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
	September 26, 2020						September 28, 2019
	Earnings to Common Shareholders		Common Shares		EPS		Earnings to Common Shareholders		Common Shares		EPS
						(in thousands, except per share data)
As reported—basic	$	65,074		9,846	$	6.61	$	33,776		9,136	$	3.70
Add: effect of dilutive potential common shares
Share-based awards		—		179				—		152
Class B Common Stock		15,254		2,308				10,581		2,862
Net effect of unvested participating shares		6		—				4		—

Net income per common share—diluted	$	80,334		12,333	$	6.51	$	44,361		12,150	$	3.65


	Thirty-nine weeks ended
	September 26, 2020						September 28, 2019
	Earnings to Common Shareholders		Common Shares		EPS		Earnings to Common Shareholders		Common Shares		EPS
					(in thousands, except per share data)
As reported—basic	$	126,146		9,663	$	13.05	$	71,761		8,797	$	8.16
Add: effect of dilutive potential common shares
Share-based awards		—		145				—		127
Class B Common Stock		31,996		2,451				23,652		2,899
Net effect of unvested participating shares		12		—				8		—

Net income per common share—diluted	$	158,154		12,259	$	12.90	$	95,421		11,823	$	8.07

During the

thirteen

and thirty-nine weeks ended

September

26, 2020,

weighted

-average stock

options

to purchase approximately 0 and 1,000 shares of Class A Common Stock were outstanding but not included in computing dilutive income per common share because their effects were anti-dilutive. During the thirteen and thirty-nine weeks ended September 28, 2019, weighted-average stock options to purchase approximately 27,000 and 21,000 shares of Class A Common Stock were outstanding but not included in computing dilutive income per common share because their effects were anti-dilutive.