EARNINGS PER SHARE
The Company presents basic net income per share using the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that otherwise would have been available to common stockholders and that determines basic net income per share for each class of common stock and participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings that would have been available to common stockholders. A participating security is defined as a security that may participate in undistributed earnings with common stock. The Company’s capital structure includes securities that participate with common stock on a one-for-one basis for distribution of dividends. These are the restricted stock awards (“RSAs”), restricted stock units (“RSUs”) and performance stock units (“PSUs”) issued pursuant to the Amended and Restated 2013 Equity Incentive Award Plan, provided that the Company does not include PSUs as participating securities until the performance conditions have been met. RSAs are outstanding shares of common stock and have the same cash dividend and voting rights as other shares of common stock. Shares of common stock subject to RSUs are not issued nor outstanding until vested, and RSUs do not have the same dividend and voting rights as common stock. However, all outstanding RSUs have accompanying dividend equivalents, requiring payment to the employees and directors with unvested RSUs of amounts equal to the dividend they would have received had the shares of common stock underlying the RSUs been actually issued and outstanding. PSUs, similar to RSUs, are awarded with dividend equivalents, provided that such amounts become payable only if the performance criteria are achieved. At the time the Compensation Committee confirms the performance criteria have been achieved, the corresponding dividend equivalents are paid on the PSUs. The Company determines the diluted net income per share by using the more dilutive of the two class-method or the treasury stock method and by including the basic weighted average of outstanding performance stock units in the calculation of diluted net income per share under the two-class method and including all potential common shares assumed issued in the calculation of diluted net income per share under the treasury stock method.
The following table sets forth the computation of net income per share attributable to PriceSmart for the twelve months ended August 31, 2025, 2024 and 2023 (in thousands, except per share amounts):
| | | | | | | | | | | | | | | | | |
| Years Ended August 31, |
| 2025 | | 2024 | | 2023 |
| Net income attributable to PriceSmart, Inc. | $ | 147,887 | | $ | 138,875 | | $ | 109,205 |
| Less: Allocation of income to unvested stockholders | (2,990) | | (1,759) | | | (1,311) | |
| Net income attributable to PriceSmart, Inc. available for distribution | $ | 144,897 | | $ | 137,116 | | $ | 107,894 |
| Basic weighted average shares outstanding | 30,056 | | 30,032 | | 30,763 |
| Add dilutive effect of performance stock units (two-class method) | 7 | | — | | 23 |
| Diluted average shares outstanding | 30,063 | | 30,032 | | 30,786 |
| Basic net income per share | $ | 4.82 | | $ | 4.57 | | $ | 3.51 |
| Diluted net income per share | $ | 4.82 | | $ | 4.57 | | $ | 3.50 |
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.