Earnings Per Share

Unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are included in the computation of earnings per share pursuant to the two-class method. Prior to June 30, 2018, certain of Mattel’s RSUs were considered participating securities because they contained nonforfeitable rights to dividend equivalents.

Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of common stock and participating securities. The remaining undistributed earnings are then allocated to common stock and participating securities as if all of the net income for the period had been distributed. Basic earnings per common share excludes dilution and is calculated by dividing net income allocable to common shares by the weighted average number of common shares outstanding for the period. Diluted earnings per common share is calculated by dividing net income allocable to common shares by the weighted average number of common shares for the period, as adjusted for the potential dilutive effect of non-participating share-based awards.

The following table reconciles earnings per common share:



	For the Year Ended
	December 31, 2018			December 31, 2017			December 31, 2016
	(In thousands, except per share amounts)
Basic:
Net (loss) income	$	(533,299	)	$	(1,054,579	)	$	312,908
Less: Net (loss) income allocable to participating RSUs (a)	—			—			(1,377		)
Net (loss) income available for basic common shares	$	(533,299	)	$	(1,054,579	)	$	311,531
Weighted average common shares outstanding	345,012			343,564			341,480
Basic net (loss) income per common share	$	(1.55	)	$	(3.07	)	$	0.91
Diluted:
Net (loss) income	$	(533,299	)	$	(1,054,579	)	$	312,908
Less: Net (loss) income allocable to participating RSUs (a)	—			—			(1,377		)
Net (loss) income available for diluted common shares	$	(533,299	)	$	(1,054,579	)	$	311,531
Weighted average common shares outstanding	345,012			343,564			341,480
Weighted average common equivalent shares arising from:
Dilutive stock options and non-participating RSUs (b)	—			—			2,753
Weighted average number of common and potential common shares	345,012			343,564			344,233
Diluted net (loss) income per common share	$	(1.55	)	$	(3.07	)	$	0.91


(a)	For the twelve months ended December 31, 2018 and December 31, 2017, Mattel did not allocate its net loss to its participating RSUs as its participating RSUs are not obligated to share in the losses of the Company. As of July 1, 2018, Mattel no longer has participating RSUs.

(b)

Mattel was in a net loss position for the twelve months ended December 31, 2018 and December 31, 2017, and, accordingly, all outstanding nonqualified stock options and non-participating RSUs were excluded from the calculation of diluted earnings per common share because their effect would be antidilutive. Nonqualified stock options and nonparticipating RSUs totaling 8.5 million shares were excluded from the calculation of diluted net income per common share for the twelve months ended December 31, 2016 because their effect would be antidilutive.