Note 8. 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. Under this method, basic net income per share is computed using the weighted average number of common shares outstanding during the period excluding common shares underlying equity awards that are unvested or subject to forfeiture. Diluted net income per share is computed using the weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential common shares consist of the common shares issuable upon the net exercise of stock options and unvested RSUs and 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.

Except with respect to voting and transfer rights, the rights of the holders of our Class A and Class B common stock are identical. Under our Articles of Incorporation, the Class A and Class B common stock share equally in any dividends, liquidation proceeds or other distribution with respect to our common stock and the Articles of Incorporation can only be amended by a vote of the shareholders. Additionally, Oregon law provides that amendments to our Articles of Incorporation that would adversely alter the rights, powers or preferences of a given class of stock, must be approved by the class of stock adversely affected by the proposed amendment. 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. Because the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis.

Following is a reconciliation of net income and weighted average shares used for our basic earnings per share (“EPS”) and diluted EPS (in thousands, except per share amounts):

Three Months Ended September 30,	2016					2015
(in thousands, except per share data)	Class A		Class B			Class A		Class B
Net income applicable to common stockholders - basic	$	50,262	$	3,779		$	39,162	$	4,229
Reallocation of net income as a result of conversion of dilutive stock options		1		(1	)		3		(3	)
Reallocation of net income due to conversion of Class B to Class A common shares outstanding		439		—			509		—
Conversion of Class B common shares into Class A common shares		3,326		—			3,690		—
Effect of dilutive stock options on net income		13		(13	)		27		(27	)
Net income applicable to common stockholders - diluted	$	54,041	$	3,765		$	43,391	$	4,199

Weighted average common shares outstanding – basic		23,432		1,762			23,727		2,562
Conversion of Class B common shares into Class A common shares		1,762		—			2,562		—
Effect of dilutive stock options on weighted average common shares		96		—			191		—
Weighted average common shares outstanding – diluted		25,290		1,762			26,480		2,562

Net income per common share - basic	$	2.14	$	2.14		$	1.65	$	1.65
Net income per common share - diluted	$	2.14	$	2.14		$	1.64	$	1.64

Three Months Ended September 30,	2016				2015
Diluted EPS	Class A		Class B		Class A		Class B
Antidilutive Securities
Shares issuable pursuant to stock options not included since they were antidilutive		—		—		18		—

Nine Months Ended September 30,	2016					2015
(in thousands, except per share data)	Class A		Class B			Class A		Class B
Net income applicable to common stockholders - basic	$	134,533	$	11,206		$	122,092	$	13,175
Reallocation of net income as a result of conversion of dilutive stock options		5		(5	)		11		(11	)
Reallocation of net income due to conversion of Class B to Class A common shares outstanding		1,365		—			1,425		—
Conversion of Class B common shares into Class A common shares		9,794		—			11,653		—
Effect of dilutive stock options on net income		42		(42	)		86		(86	)
Net income applicable to common stockholders - diluted	$	145,739	$	11,159		$	135,267	$	13,078

Weighted average common shares outstanding – basic		23,530		1,960			23,742		2,562
Conversion of Class B common shares into Class A common shares		1,960		—			2,562		—
Effect of dilutive stock options on weighted average common shares		108		—			196		—
Weighted average common shares outstanding – diluted		25,598		1,960			26,500		2,562

Net income per common share - basic	$	5.72	$	5.72		$	5.14	$	5.14
Net income per common share - diluted	$	5.69	$	5.69		$	5.10	$	5.10

Nine Months Ended September 30,	2016				2015
Diluted EPS	Class A		Class B		Class A		Class B
Antidilutive Securities
Shares issuable pursuant to stock options not included since they were antidilutive		—		—		17		—