Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31, 2016, 2015 and 2014.



	Year Ended December 31,
	2016			2015			2014
	(In thousands, except per share amounts)
Amounts attributable to The Medicines Company:
Net (loss) income from continuing operations	$	(119,302	)	$	(221,930	)	$	319
Income (loss) from discontinued operations, net of tax	184			(130,826		)	(32,529		)
Net loss attributable to The Medicines Company	$	(119,118	)	$	(352,756	)	$	(32,210	)
							.
Weighted average common shares outstanding, basic	69,909			66,809			64,473
Plus: net effect of dilutive stock options, warrants, restricted common shares and shares issuable upon conversion of Notes	—			—			2,195
Weighted average common shares outstanding, diluted	69,909			66,809			66,668

Basic (loss) income per common share attributable to The Medicines Company:
(Loss) income from continuing operations	$	(1.71	)	$	(3.32	)	$	—
Income (loss) from discontinued operations	—			(1.96		)	(0.50		)
Basic loss per share	$	(1.71	)	$	(5.28	)	$	(0.50	)

Diluted (loss) income per common share attributable to The Medicines Company:
(Loss) income from continuing operations	$	(1.71	)	$	(3.32	)	$	—
Income (loss) from discontinued operations	—			(1.96		)	(0.49		)
Diluted loss per share	$	(1.71	)	$	(5.28	)	$	(0.49	)

Basic (loss) income per share is computed by dividing consolidated net (loss) income attributable to The Medicines Company by the weighted average number of shares of common stock outstanding during the period, excluding unvested restricted common shares. The potentially dilutive effect of the Company’s stock options and unvested restricted common stock on earnings per share is computed under the treasury stock method. The Company has either the obligation or the option to pay cash for the aggregate amount due upon conversion for all of the Company’s convertible senior notes. Since it is the Company’s current intent to settle in cash the principal amount of all of its convertible senior notes upon conversion, the potentially dilutive effect of such notes on earnings per share is computed under the treasury stock method.

For periods of net loss, diluted loss per share is calculated similar to basic loss per share as the effect of including all potentially dilutive common share equivalents is anti-dilutive. Due to the period of net loss from continuing operations attributable to The Medicines Company, the calculation of diluted loss per share for the year ended December 31, 2016 and 2015 excluded 3,112,627 and 3,724,272, respectively, of potentially dilutive stock options, warrants, restricted common shares, and shares issuable upon conversion of the 2017 and 2022 Notes as their inclusion would have an anti-dilutive effect.

For periods of net income when the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company’s net income by the weighted average number of shares outstanding and the impact of all potential dilutive common shares, consisting primarily of stock options, unvested restricted common stock, shares issuable upon conversion of convertible senior notes due 2017 and 2022 and stock purchase warrants. For the year ended December 31, 2014, options to purchase and unvested restricted stock of 3,915,906 shares that could potentially dilute basic earnings per share were excluded from the calculation of diluted earnings per share as their effect would have been anti-dilutive.

To minimize the impact of potential dilution upon conversion of the 2023 Notes, the Company entered into capped call transactions separate from the issuance of the 2023 Notes with certain counterparties. The capped calls have a strike price of $48.97 and a cap price of $64.68 and are exercisable when and if the 2023 Notes are converted. If upon conversion of the 2023 Notes, the price of the Company’s common stock is above the strike price of the capped calls, the counterparties will deliver shares of the Company’s common stock and/or cash with an aggregate value equal to the difference between the price of the Company’s common stock at the conversion date and the strike price, multiplied by the number of shares of the Company’s common stock related to the capped calls being exercised. The capped call transactions that are part of the 2023 Notes are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive.

In June 2012, the Company issued the 2017 Notes (see Note 10, “Convertible Senior Notes”). In connection with the issuance of the 2017 Notes, the Company entered into convertible note hedge transactions with respect to its common stock (2017 Note Hedges) with several of the initial purchasers of the 2017 Notes, their affiliates and other financial institutions (2017 Hedge Counterparties). The options that are part of the 2017 Note Hedges are not considered for purposes of calculating the total shares outstanding under the basic and diluted net income per share, as their effect would be anti-dilutive. The 2017 Note Hedges are expected generally to reduce the potential dilution with respect to shares of the Company’s common stock upon any conversion of the 2017 Notes in the event that the market price per share of the Company’s common stock, as measured under the terms of the 2017 Note Hedges, is greater than the strike price of the 2017 Note Hedges, which initially corresponded to the conversion price of the 2017 Notes and are subject to anti-dilution adjustments substantially similar to those applicable to the conversion rate of the 2017 Notes. In June 2016, as part of the repurchase of $220.0 million in aggregate principal amount of the 2017 Notes, the Company settled the hedges related to the repurchased bonds. For the year ended December 31, 2014, the number of shares of common stock issuable upon conversion of the 2017 Notes were excluded from the calculation of diluted loss per share as their inclusion would have been anti-dilutive.

In addition, in connection with the 2017 Note Hedges, the Company entered into warrant transactions with the 2017 Hedge Counterparties, pursuant to which the Company sold warrants (2017 Warrants) to the Hedge Counterparties to purchase, subject to customary anti-dilution adjustments, up to two million shares of the Company’s common stock at a strike price of $34.20 per share. The 2017 Warrants will have a dilutive effect with respect to the Company’s common stock to the extent that the market price per share of the Company’s common stock, as measured under the terms of the 2017 Warrants, exceeds the applicable strike price of the 2017 Warrants. However, subject to certain conditions, the Company may elect to settle all of the 2017 Warrants in cash. In June 2016, as part of the repurchase of $220.0 million in aggregate principal amount of the 2017 Notes, the Company settled the warrants related to the repurchased bonds. For the year ended December 31, 2014, the 2017 Warrants did not have a dilutive effect on earnings per share because the average market price during the periods presented was below the strike price.