Net Income Per Share of Class A and Class B Common Stock |
Note 2. 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 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):
C:
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Year Ended December 31, |
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2010 |
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2011 |
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2012 |
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Class A |
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Class B |
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Class A |
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Class B |
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Class A |
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Class B |
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C: C:
Basic net income (loss) per
share:
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Numerator
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Allocation of undistributed
earnings—continuing operations
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$ |
6,569 |
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$ |
1,936 |
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$ |
7,658 |
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$ |
2,079 |
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$ |
8,641 |
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$ |
2,147 |
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Allocation of undistributed
earnings—discontinued operations
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0 |
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0 |
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0 |
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0 |
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(41 |
) |
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(10 |
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Total
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$ |
6,569 |
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$ |
1,936 |
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$ |
7,658 |
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$ |
2,079 |
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$ |
8,600 |
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$ |
2,137 |
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Denominator
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Weighted-average common shares
outstanding
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246,168 |
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72,534 |
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253,862 |
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68,916 |
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262,078 |
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65,135 |
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Number of shares used in per share
computation
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246,168 |
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72,534 |
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253,862 |
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68,916 |
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262,078 |
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65,135 |
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Basic net income (loss) per
share
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Continuing operations
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$ |
26.69 |
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$ |
26.69 |
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$ |
30.17 |
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$ |
30.17 |
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$ |
32.97 |
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$ |
32.97 |
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Discontinued operations
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0 |
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0 |
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0 |
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0 |
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(0.16 |
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(0.16 |
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Basic net income per share
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$ |
26.69 |
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$ |
26.69 |
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$ |
30.17 |
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$ |
30.17 |
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$ |
32.81 |
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$ |
32.81 |
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Diluted net income per
share:
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Numerator
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Allocation of undistributed earnings
for basic computation—continuing operations
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$ |
6,569 |
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$ |
1,936 |
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$ |
7,658 |
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$ |
2,079 |
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$ |
8,641 |
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$ |
2,147 |
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Reallocation of undistributed
earnings as a result of conversion of Class B to Class A
shares
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1,936 |
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0 |
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2,079 |
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0 |
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2,147 |
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0 |
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Reallocation of undistributed
earnings to Class B shares
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0 |
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(26 |
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0 |
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(27 |
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0 |
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(31 |
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Allocation of undistributed
earnings—continuing operations
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$ |
8,505 |
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$ |
1,910 |
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$ |
9,737 |
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$ |
2,052 |
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$ |
10,788 |
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$ |
2,116 |
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Allocation of undistributed earnings
for basic computation—discontinued operations
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$ |
0 |
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$ |
0 |
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$ |
0 |
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$ |
0 |
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$ |
(41 |
) |
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$ |
(10 |
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Reallocation of undistributed
earnings as a result of conversion of Class B to Class A
shares
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0 |
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0 |
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0 |
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0 |
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(10 |
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0 |
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Reallocation of undistributed
earnings to Class B shares
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0 |
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0 |
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0 |
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0 |
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0 |
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0 |
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Allocation of undistributed
earnings—discontinued operations
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$ |
0 |
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$ |
0 |
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$ |
0 |
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$ |
0 |
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$ |
(51 |
) |
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$ |
(10 |
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Denominator
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Number of shares used in basic
computation
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246,168 |
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72,534 |
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253,862 |
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68,916 |
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262,078 |
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65,135 |
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Weighted-average effect of dilutive
securities
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Add:
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Conversion of Class B to Class A
common shares outstanding
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72,534 |
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0 |
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68,916 |
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0 |
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65,135 |
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0 |
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Employee stock options, including
warrants issued under Transferable Stock Option program
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3,410 |
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71 |
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2,958 |
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46 |
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2,944 |
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|
34 |
|
Restricted stock units
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1,139 |
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0 |
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1,478 |
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0 |
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2,148 |
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0 |
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Number of shares used in per share
computation
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323,251 |
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72,605 |
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327,214 |
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68,962 |
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332,305 |
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65,169 |
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Diluted net income (loss) per
share:
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Continuing operations
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26.31 |
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26.31 |
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29.76 |
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29.76 |
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32.46 |
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32.46 |
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Discontinued operations
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0.00 |
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0.00 |
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0.00 |
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0.00 |
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(0.15 |
) |
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(0.15 |
) |
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Diluted net income per
share
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$ |
26.31 |
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$ |
26.31 |
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$ |
29.76 |
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$ |
29.76 |
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$ |
32.31 |
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$ |
32.31 |
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C:
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.
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