How does Cost Cutters Family Hair Salon calculate its basic earnings per share?
Cost_Cutters_Family_Hair_Salon Franchise · 2024 FDDAnswer from 2024 FDD Document
The Company's basic earnings per share is calculated as net income divided by weighted average common shares outstanding, excluding unvested outstanding stock options (SOs), stock appreciation rights (SARs), restricted stock units (RSUs) and stocksettled performance units (PSUs). The Company's diluted earnings per share is calculated as net income divided by weighted average common shares and common share equivalents outstanding, which includes shares issued under the Company's stockbased compensation plans. Stock-based awards with exercise prices greater than the average market price of the Company's common stock are excluded from the computation of diluted earnings per share. The computation of weighted average shares outstanding, assuming dilution, excluded 4,176,371 and 3,211,485 of stock-based awards during the three months ended September 30, 2023 and 2022, respectively, as they were not dilutive under the treasury stock method.
Source: Item 23 — RECEIPT (FDD pages 76–439)
What This Means (2024 FDD)
According to the 2024 FDD, Cost Cutters Family Hair Salon calculates its basic earnings per share by dividing net income by the weighted average of common shares outstanding. This calculation excludes unvested outstanding stock options (SOs), stock appreciation rights (SARs), restricted stock units (RSUs), and stock-settled performance units (PSUs).
Additionally, Cost Cutters Family Hair Salon calculates diluted earnings per share by dividing net income by the weighted average of common shares and common share equivalents outstanding. This includes shares issued under the company's stock-based compensation plans. Stock-based awards with exercise prices exceeding the average market price of the company's common stock are excluded from the diluted earnings per share calculation.
The computation of weighted average shares outstanding, assuming dilution, excluded 4,176,371 and 3,211,485 of stock-based awards during the three months ended September 30, 2023 and 2022, respectively, as they were not dilutive under the treasury stock method. This indicates that Cost Cutters Family Hair Salon takes into account potential dilution from stock-based compensation when calculating earnings per share, providing a more comprehensive view of profitability for investors and franchisees.