How were Management Recruiters' diluted common shares outstanding calculated?
Management_Recruiters Franchise · 2024 FDDAnswer from 2024 FDD Document
on would be anti-dilutive. Outstanding common stock equivalents at December 31, 2022 and December 31, 2021 totaled approximately 215 thousand and 209 thousand, respectively.
Diluted common shares outstanding were calculated using the treasury stock method and are as follows (in thousands):
| Year ended | ||
|---|---|---|
| December 31, | December 31, | |
| 2022 | 2021 | |
| Weighted average number of common shares used in basic net income per common share | 13,654 | 13,494 |
| Dilutive effects of stock options and unvested restricted stock | 67 | 112 |
| Weighted average number of common shares used in diluted net income per common share | 13,721 | 13,606 |
Property and Equipment
We record property and equipment at cost. We compute depreciation using the straight-line method over the estimated useful lives. Land is not depreciated. Repairs and maintenance are expensed as incurred. When assets are sold or retired, we eliminate cost and accumulated depreciation from the consolidated balance sheet and reflect a gain or loss in the consolidated statement of income.
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 65–66)
What This Means (2024 FDD)
According to Management Recruiters' 2024 Franchise Disclosure Document, the diluted common shares outstanding were calculated using the treasury stock method. Diluted earnings per share reflect the potential dilution of securities that could share in Management Recruiters' earnings through the conversion of common shares issuable via outstanding stock options and unvested restricted shares. This excludes situations where their inclusion would be anti-dilutive, meaning they would increase earnings per share.
For the years ending December 31, 2023, and December 31, 2022, Management Recruiters reported outstanding common stock equivalents totaling approximately 155,000 and 215,000, respectively. The treasury stock method accounts for the potential dilution by assuming that outstanding stock options and unvested restricted shares are exercised, and the funds received are used to repurchase shares of common stock at the average market price during the period.
The weighted average number of common shares used in calculating basic net income per common share for the year ending December 31, 2023, was 13,733,000, with an increase to 13,801,000 when considering the dilutive effects of stock options and unvested restricted stock. Similarly, for the year ending December 31, 2022, the basic weighted average was 13,654,000, which increased to 13,721,000 after considering dilutive effects. This calculation is crucial for investors and franchisees to understand the true earnings potential per share, considering all potential dilutive factors.