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 unvested common shares subject to repurchase or cancellation. 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 incremental common shares issuable upon the exercise of stock options and unvested restricted shares subject to repurchase or cancellation. The dilutive effect of outstanding stock options and other grants 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. Our Restated Articles of Incorporation require that the Class A and Class B common stock must 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 stockholders. Additionally, Oregon law provides that amendments to our Articles of Incorporation, which would have the effect of adversely altering 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):



Year Ended December 31,	2017					2016					2015
(in thousands, except per share data)	Class A		Class B			Class A		Class B			Class A		Class B
Net income applicable to common stockholders - basic	$	233,399	$	11,818		$	182,369	$	14,689		$	165,172	$	17,827
Reallocation of distributed net income as a result of conversion of dilutive stock options	4		(4		)	8		(8		)	15		(15		)
Reallocation of distributed net income due to conversion of Class B to Class A common shares outstanding	1,275		—			1,791		—			1,932		—
Conversion of Class B common shares into Class A common shares	10,505		—			12,833		—			15,760		—
Effect of dilutive stock options on net income	34		(34		)	57		(57		)	120		(120		)
Net income applicable to common stockholders - diluted	$	245,217	$	11,780		$	197,058	$	14,624		$	182,999	$	17,692

Weighted average common shares outstanding – basic	23,857		1,208			23,515		1,894			23,729		2,561
Conversion of Class B common shares into Class A common shares	1,208		—			1,894		—			2,561		—
Effect of employee stock purchases and restricted stock units on weighted average common shares	80		—			112		—			200		—
Weighted average common shares outstanding – diluted	25,145		1,208			25,521		1,894			26,490		2,561

Net income per common share - basic	$	9.78	$	9.78		$	7.76	$	7.76		$	6.96	$	6.96
Net income per common share - diluted	$	9.75	$	9.75		$	7.72	$	7.72		$	6.91	$	6.91

Antidilutive Securities
Shares issuable pursuant to employee stock purchases not included since they were antidulutive	12		—			—		—			16		—