21. Earnings Per Share

Basic and Diluted Earnings Per Share

Basic earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding during the period. Diluted earnings per share of Class A common stock is computed by dividing net income available to Camping World Holdings, Inc. by the weighted-average number of shares of Class A common stock outstanding adjusted to give effect to potentially dilutive securities.

As described in Note 18 — Stockholders’ Equity, on October 6, 2016, the LLC Agreement was amended and restated to, among other things, (i) provide for a new single class of common membership interests, the common units of CWGS, LLC, and (ii) exchange all of the then-existing membership interests of the Original Equity Owners for common units of CWGS, LLC. This Recapitalization changed the relative membership rights of the Original Equity Owners such that retroactive application of the Recapitalization to periods prior to the IPO for the purposes of calculating earnings per share would not be appropriate.

Prior to the IPO, the CWGS, LLC membership structure included membership units, preferred units, and Profits Units. During the period of September 30, 2014 to October 6, 2016, there were 70,000 preferred units outstanding that received a total preferred return of $2.1 million per quarter in addition to their proportionate share of distributions made to all members of CWGS, LLC. The Company analyzed the calculation of earnings per unit for periods prior to the IPO using the two-class method and determined that it resulted in values that would not be meaningful to the users of these consolidated financial statements. Therefore, earnings per share information has not been presented for periods prior to the IPO on October 6, 2016. The basic and diluted earnings per share period for the year ended December 31, 2016 represents only the period of October 6, 2016 to December 31, 2016.

The following table sets forth reconciliations of the numerators and denominators used to compute basic and diluted earnings per share of Class A common stock:


	Year Ended
	December 31,
	2016
Numerator:
Net income	$	13,635
Less: net income attributable to non-controlling interests		(11,576)
Net income attributable to Camping World Holdings, Inc. — basic		2,059
Add: Reallocation of net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC for Class A common stock		5,169
Net income attributable to Camping World Holdings, Inc. — diluted	$	7,228
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		18,766
Dilutive common units of CWGS, LLC that are convertible into Class A common stock		64,836
Weighted-average shares of Class A common stock outstanding — diluted		83,602

Earnings per share of Class A common stock — basic	$	0.11
Earnings per share of Class A common stock — diluted	$	0.09

For the year ended December 31, 2016, 1.1 million stock options and 0.1 million restricted stock units were excluded from the weighted-average in the computation of diluted earnings per share of Class A common stock because the effect would have been anti-dilutive.

Shares of the Company’s Class B and Class C common stock do not share in the earnings or losses of the Company and are therefore not participating securities. As such, separate presentation of basic and diluted earnings per share of Class B or Class C common stock under the two-class method has not been presented.

Basic and Diluted Pro Forma Earnings Per Share

The pro forma financial information presented has been computed to reflect income attributable to non-controlling interests and income tax expense assuming the Company’s IPO and the Recapitalization occurred on January 1, 2016. To calculate the income tax expense, an effective tax rate of 38.5% was applied to the taxable income of the pass-through entities that would have been attributed to the CWH if the IPO and Recapitalization had occurred on January 1, 2016.

The following table sets forth reconciliations of the numerators and denominators used to compute pro forma basic and diluted earnings per share of Class A common stock:


	Year Ended
	December 31,
	2016
Numerator:
Net income	$	203,237
Less: pro forma net income attributable to non-controlling interests		(158,296)
Less: pro forma income tax expense		(15,692)
Pro forma net income attributable to Camping World Holdings, Inc. — basic		29,249
Add: Reallocation of pro forma net income attributable to non-controlling interests from the assumed exchange of common units of CWGS, LLC for Class A common stock		98,175
Pro forma net income attributable to Camping World Holdings, Inc. — diluted	$	127,424
Denominator:
Weighted-average shares of Class A common stock outstanding — basic		18,936
Dilutive restricted stock units		6
Dilutive common units of CWGS, LLC that are convertible into Class A common stock		64,836
Weighted-average shares of Class A common stock outstanding — diluted		83,778

Earnings per share of Class A common stock — basic	$	1.54
Earnings per share of Class A common stock — diluted	$	1.52

For the year ended December 31, 2016, 0.3 million stock options were excluded from the weighted-average in the computation of pro forma diluted earnings per share of Class A common stock because the effect would have been anti-dilutive.