Net Income Per Share of Class A and Class B Common Stock
We compute net income per share of Class A and Class B common stock using the two-class method. Basic net income per share is computed using the weighted-average number of common shares outstanding during the period. Diluted net income per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of stock options, warrants issued under the TSO program, and restricted stock units. The TSO program was discontinued as of November 29, 2013. The dilutive effect of outstanding stock options, warrants, and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while the diluted net income per share of Class B common stock does not assume the conversion of those shares.
The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are identical, except with respect to voting. Further, there are a number of safeguards built into our certificate of incorporation, as well as Delaware law, which preclude our board of directors from declaring or paying unequal per share dividends on our Class A and Class B common stock. Specifically, Delaware law provides that amendments to our certificate of incorporation which would have the effect of adversely altering the rights, powers, or preferences of a given class of stock (in this case the right of our Class A common stock to receive an equal dividend to any declared on our Class B common stock) must be approved by the class of stock adversely affected by the proposed amendment. In addition, our certificate of incorporation provides that before any such amendment may be put to a stockholder vote, it must be approved by the unanimous consent of our board of directors. As a result, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as we assume the conversion of Class B common stock in the computation of the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation.
The following table sets forth the computation of basic and diluted net income per share of Class A and Class B common stock (in millions, except share amounts which are reflected in thousands and per share amounts):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2011 | | 2012 | | 2013 |
| Class A | | Class B | | Class A | | Class B | | Class A | | Class B |
Basic net income (loss) per share: | | | | | | | | | | | |
Numerator | | | | | | | | | | | |
Allocation of undistributed earnings - continuing operations | $ | 7,658 |
| | $ | 2,079 |
| | $ | 8,641 |
| | $ | 2,147 |
| | $ | 10,037 |
| | $ | 2,177 |
|
Allocation of undistributed earnings - discontinued operations | 0 |
| | 0 |
| | (41 | ) | | (10 | ) | | 580 |
| | 126 |
|
Total | $ | 7,658 |
| | $ | 2,079 |
| | $ | 8,600 |
| | $ | 2,137 |
| | $ | 10,617 |
| | $ | 2,303 |
|
Denominator | | | | | | | | | | | |
Number of shares used in per share computation | 253,862 |
| | 68,916 |
| | 262,078 |
| | 65,135 |
| | 273,518 |
| | 59,328 |
|
Basic net income (loss) per share | | | | | | | | | | | |
Continuing operations | $ | 30.17 |
| | $ | 30.17 |
| | $ | 32.97 |
| | $ | 32.97 |
| | $ | 36.70 |
| | $ | 36.70 |
|
Discontinued operations | 0 |
| | 0 |
| | (0.16 | ) | | (0.16 | ) | | 2.12 |
| | 2.12 |
|
Basic net income per share | $ | 30.17 |
| | $ | 30.17 |
| | 32.81 |
| | $ | 32.81 |
| | $ | 38.82 |
| | $ | 38.82 |
|
Diluted net income per share: | | | | | | | | | | | |
Numerator | | | | | | | | | | | |
Allocation of undistributed earnings for basic computation - continuing operations | $ | 7,658 |
| | $ | 2,079 |
| | $ | 8,641 |
| | $ | 2,147 |
| | $ | 10,037 |
| | $ | 2,177 |
|
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares | 2,079 |
| | 0 |
| | 2,147 |
| | 0 |
| | 2,177 |
| | 0 |
|
Reallocation of undistributed earnings to Class B shares | 0 |
| | (27 | ) | | 0 |
| | (31 | ) | | 0 |
| | (38 | ) |
|
| | | | | | | | | | | | | | | | | | | | | | | |
Allocation of undistributed earnings - continuing operations | $ | 9,737 |
| | $ | 2,052 |
| | $ | 10,788 |
| | $ | 2,116 |
| | $ | 12,214 |
| | $ | 2,139 |
|
Allocation of undistributed earnings for basic computation - discontinued operations | $ | 0 |
| | $ | 0 |
| | $ | (41 | ) | | $ | (10 | ) | | $ | 580 |
| | $ | 126 |
|
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares | 0 |
| | 0 |
| | (10 | ) | | 0 |
| | 126 |
| | 0 |
|
Reallocation of undistributed earnings to Class B shares | 0 |
| | 0 |
| | 0 |
| | 0 |
| | 0 |
| | (2 | ) |
Allocation of undistributed earnings - discontinued operations | $ | 0 |
| | $ | 0 |
| | $ | (51 | ) | | $ | (10 | ) | | $ | 706 |
| | $ | 124 |
|
Denominator | | | | | | | | | | | |
Number of shares used in basic computation | 253,862 |
| | 68,916 |
| | 262,078 |
| | 65,135 |
| | 273,518 |
| | 59,328 |
|
Weighted-average effect of dilutive securities | | | | | | | | | | | |
Add: | | | | | | | | | | | |
Conversion of Class B to Class A common shares outstanding | 68,916 |
| | 0 |
| | 65,135 |
| | 0 |
| | 59,328 |
| | 0 |
|
Employee stock options, including warrants issued under Transferable Stock Option program | 2,958 |
| | 46 |
| | 2,944 |
| | 34 |
| | 2,748 |
| | 4 |
|
Restricted stock units | 1,478 |
| | 0 |
| | 2,148 |
| | 0 |
| | 3,215 |
| | 0 |
|
Number of shares used in per share computation | 327,214 |
| | 68,962 |
| | 332,305 |
| | 65,169 |
| | 338,809 |
| | 59,332 |
|
Diluted net income (loss) per share: | | | | | | | | | | | |
Continuing operations | $ | 29.76 |
| | $ | 29.76 |
| | $ | 32.46 |
| | $ | 32.46 |
| | $ | 36.05 |
| | $ | 36.05 |
|
Discontinued operations | 0 |
| | 0 |
| | (0.15 | ) | | (0.15 | ) | | 2.08 |
| | 2.08 |
|
Diluted net income per share | $ | 29.76 |
| | $ | 29.76 |
| | $ | 32.31 |
| | $ | 32.31 |
| | $ | 38.13 |
| | $ | 38.13 |
|
The net income per share amounts are the same for Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation.
