Note 3. Net Income Per Common Share

The Company's restricted share awards subject to repurchase and settled in shares of common stock upon vesting have the nonforfeitable right to receive dividends on an equal basis with common stock and therefore are considered participating securities that must be included in the calculation of net income per share using the two-class method. Under the two-class method, basic and diluted net income per common share are determined by calculating net income per share for common stock and participating securities based on participation rights in undistributed earnings. Diluted net income per common share also considers the dilutive effect of in-the-money stock options, calculated using the treasury stock method. Under the treasury stock method, the amount of assumed proceeds from unexercised stock options includes the amount of compensation cost attributable to future services not yet recognized, assumed proceeds from the exercise of the options, and the incremental income tax benefit or liability as if the options were exercised during the period.

The computation of basic and diluted net income per common share using the two-class method is as follows (in thousands, except per share amounts):


	Three Months Ended March 31,						Nine Months Ended March 31,
	Three Months Ended March 31,						Nine Months Ended March 31,
	2012			2011			2012			2011
Basic net income per common share calculation
Net income	$	7,077		$	10,696		$	24,343		$	29,482
Less: Undistributed earnings allocated to participating securities		(61	)		(149	)		(235	)		(500	)

Net income attributable to common shares—basic	$	7,016		$	10,547		$	24,108		$	28,982

Weighted-average number of common shares used to compute basic net income per common share		41,126			38,269			40,679			37,674

Basic net income per common share	$	0.17		$	0.28		$	0.59		$	0.77

Diluted net income per common share calculation
Net income	$	7,077		$	10,696		$	24,343		$	29,482
Less: Undistributed earnings allocated to participating securities		(57	)		(133	)		(217	)		(449	)

Net income attributable to common shares—diluted	$	7,020		$	10,563		$	24,126		$	29,033

Weighted-average number of common shares used to compute basic net income per common share		41,126			38,269			40,679			37,674
Dilutive effect of options to purchase common stock		3,484			4,585			3,278			4,305

Weighted-average number of common shares used to compute diluted net income per common share		44,610			42,854			43,957			41,979

Diluted net income per common share	$	0.16		$	0.25		$	0.55		$	0.69

For the three and nine months ended March 31, 2012 and 2011, the Company had stock options outstanding that could potentially dilute basic earnings per common share in the future, but were excluded from the computation of diluted net income per common share in the periods presented, as their effect would have been anti-dilutive. The shares of common stock issuable upon exercise of such anti-dilutive outstanding stock options were 2,902,000 and 3,034,000 for the three and nine months ended March 31, 2012, respectively, and 2,254,000 and 3,329,000 for the three and nine months ended March 31, 2011, respectively.