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 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 fiscal years ended September 1, 2018, September 2, 2017 and September 3, 2016, respectively:



	For the Fiscal Years Ended
	September 1,		September 2,		September 3,
	2018		2017		2016
	(52 weeks)		(52 weeks)		(53 weeks)

Net income as reported	$	329,223	$	231,431	$	231,216
Less: Distributed net income available to participating securities		(89)		(206)		(308)
Less: Undistributed net income available to participating securities		(291)		(410)		(601)

Numerator for basic net income per share:
Undistributed and distributed net income available to common shareholders	$	328,843	$	230,815	$	230,307
Add: Undistributed net income allocated to participating securities		291		410		601
Less: Undistributed net income reallocated to participating securities		(290)		(408)		(600)

Numerator for diluted net income per share:
Undistributed and distributed net income available to common shareholders	$	328,844	$	230,817	$	230,308

Denominator:
Weighted average shares outstanding for basic net income per share		56,355		56,591		60,908
Effect of dilutive securities		352		380		168
Weighted average shares outstanding for diluted net income per share		56,707		56,971		61,076

Net income per share two-class method:
Basic	$	5.84	$	4.08	$	3.78
Diluted	$	5.80	$	4.05	$	3.77

Potentially dilutive securities		207		—		843

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. Prior to the adoption of ASU 2016-09 Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in the second quarter of fiscal 2017, the assumed tax benefits upon the exercise of options and vesting of restricted stock units were also included in this calculation.