10. Net Income Per Share

Basic and diluted earnings per share are computed pursuant to the two-class method. The two-class method determines earnings per share for each class of common stock and participating security according to their respective participation rights in undistributed earnings. Unvested restricted stock awards granted to employees are considered participating securities as they receive non-forfeitable rights to cash dividends at the same rate as common stock. In accordance with ASC Topic No. 260, diluted net income per share is calculated using the more dilutive of the following two approaches:

Assume exercise of stock options and vesting of restricted stock using the treasury stock method.

Assume exercise of stock options using the treasury stock method, but assume participating securities (unvested restricted stock) are not vested and allocate earnings to common shares and participating securities using the two-class method.

For the three and six months ended June 30, 2013, the two-class method was used in the computation of diluted net income per share as this approach was more dilutive. For the three and six months ended June 30, 2012, the treasury stock method was used in the computation of diluted net income per share, as both approaches resulted in the same diluted net income per share. The following presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share (in thousands, except share and per share data):


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Numerator:
Net income, as reported	$	7,311		$	7,415		$	15,927		$	13,135
Less: net income attributable to participating securities		(129	)		(129	)		(269	)		(214	)

Net income available to common shareholders—basic	$	7,182		$	7,286		$	15,658		$	12,921

Denominator:
Basic:
Weighted-average shares of common stock outstanding		38,420,617			36,689,475			38,070,822			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(642,750	)		(655,308	)		(600,044	)

Weighted-average number of common shares used in computing basic net income per common share		37,725,082			36,046,725			37,415,514			36,164,567

Net income per share applicable to common shareholders—basic	$	0.19		$	0.20		$	0.42		$	0.36


	Three Months Ended June 30,			Six Months Ended June 30,
	2013			2013
Numerator:
Net income available to common shareholders—basic	$	7,182		$	15,658
Add-back: undistributed earnings allocated to unvested shareholders		91			195
Less: undistributed earnings reallocated to unvested shareholders		(88	)		(188	)

Net income available to common shareholders—diluted	$	7,185		$	15,665

Denominator:
Diluted:
Weighted-average shares of common stock outstanding		38,420,617			38,070,822
Less: weighted-average shares of unvested restricted common stock outstanding		(695,535	)		(655,308	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,304,571			1,343,293

Weighted-average number of common shares used in computing diluted net income per common share		39,029,653			38,758,807

Net income per share applicable to common shareholders—diluted	$	0.18		$	0.40


	Three Months Ended June 30,			Six Months Ended June 30,
	2012			2012
Numerator:
Net income, as reported	$	7,415		$	13,135
Less: net income attributable to participating securities		(129	)		(214	)

Net income available to common shareholders—diluted	$	7,286		$	12,921

Denominator:
Diluted:
Weighted-average shares of common stock outstanding		36,689,475			36,764,611
Less: weighted-average shares of unvested restricted common stock outstanding		(642,750	)		(600,044	)
Weighted-average number of common shares issuable upon exercise of outstanding stock options, based on the treasury stock method		1,263,738			1,294,178
Weighted-average number of restricted stock, based on the treasury stock method		113,069			131,212

Weighted-average number of common shares used in computing diluted net income per common share		37,423,532			37,589,957

Net income per share applicable to common shareholders—diluted	$	0.19		$	0.34

The following common share equivalents have been excluded from the computation of diluted weighted-average shares outstanding, as their effect would have been anti-dilutive:


	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Options		441,924		1,941,448		316,393		1,758,482
Unvested restricted stock		89		3,521		33,752		2,792

The Company excludes options with combined exercise prices, and unvested restricted stock with unamortized fair values that are greater than the average market price for the Company’s common stock from the calculation of diluted net income per share because their effect is anti-dilutive.