Note 2. Net Income Per Share

Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of dilutive common shares outstanding during the period. Diluted shares outstanding are calculated by adding to the weighted average shares outstanding any potential dilutive securities outstanding for the period. Potential dilutive securities include stock options, restricted stock awards, restricted stock units, performance-based stock awards and shares to be purchased under the Company’s employee stock purchase plan. In periods when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods when a loss is reported, basic and dilutive loss per share are the same. The Company’s basic and diluted net income per share for the three and nine months ended December 31, 2013 and 2012 were as follows (in thousands, except per share data):


	Three Months Ended December 31,				Nine Months Ended December 31,
	2013		2012		2013		2012
Basic Net Income Per Share
Net income	$	4,393	$	2,684	$	3,729	$	11,272


Weighted average shares used in computing basic net income per share		39,592		39,417		39,179		39,331


Net income per share - basic	$	0.11	$	0.07	$	0.10	$	0.29


	Three Months Ended December 31,				Nine Months Ended December 31,
	2013		2012		2013		2012
Diluted Net Income Per Share
Net income	$	4,393	$	2,684	$	3,729	$	11,272


Weighted average shares used in computing basic net income per share		39,592		39,417		39,179		39,331
Effect of dilutive securities		2,134		1,448		2,136		2,087

Weighted average shares used in computing diluted net income per share		41,726		40,865		41,315		41,418

Net income per share - diluted	$	0.11	$	0.07	$	0.09	$	0.27

For the three and nine months ended December 31, 2013, approximately 3,000 and 252,000 shares underlying out-of-the-money stock options were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive. In addition, for each of the three and nine months ended December 31, 2013, approximately 85,000 restricted shares that related to performance-based awards where milestones were not met were not included in the computation of diluted earnings per share because their inclusion would also have been anti-dilutive.

For the three and nine months ended December 31, 2012, approximately 575,000 and 268,000 shares underlying out-of-the-money stock options and approximately 333,000 and 294,000 restricted shares, respectively, primarily related to out-of-the-money stock options and performance-based awards where milestones were not met, were not included in the computation of diluted earnings per share because their inclusion would have been anti-dilutive.