Note 3. Net Income per Share

The Company’s non-vested restricted stock awards contain non-forfeitable rights to dividends and meet the criteria of a participating security as defined by Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share”. Under the two-class method, net income per share is computed by dividing net income allocated to common shareholders by the weighted average number of common shares outstanding for the period. In applying the two-class method, net income is allocated to both common shares and participating securities based on their respective weighted average shares outstanding for the period. The following table sets forth the computation of basic and diluted net income per common share under the two-class method for the thirteen weeks ended December 1, 2018 and December 2, 2017, respectively:


	Thirteen Weeks Ended
	December 1,		December 2,
	2018		2017
Net income as reported	$	74,232	$	59,585
Less: Distributed net income available to participating securities		(20)		(34)
Less: Undistributed net income available to participating securities		(33)		(69)
Numerator for basic net income per share:
Undistributed and distributed net income available to common shareholders	$	74,179	$	59,482
Add: Undistributed net income allocated to participating securities		33		69
Less: Undistributed net income reallocated to participating securities		(33)		(69)

Numerator for diluted net income per share:
Undistributed and distributed net income available to common shareholders	$	74,179	$	59,482
Denominator:
Weighted average shares outstanding for basic net income per share		55,502		56,287
Effect of dilutive securities		329		217
Weighted average shares outstanding for diluted net income per share		55,831		56,504
Net income per share two-class method:
Basic	$	1.34	$	1.06
Diluted	$	1.33	$	1.05

Potentially dilutive securities		408		957

Potentially dilutive securities attributable to outstanding stock options and restricted stock units are excluded from the calculation of diluted earnings per share where the combined exercise price and average unamortized fair value are greater than the average market price of MSC common stock, and therefore their inclusion would be anti-dilutive.