Earnings per Share

9 Months Ended

Sep. 30, 2019

Basic earnings per share (EPS) is calculated using the weighted-average number of common shares outstanding. Diluted EPS is calculated using the weighted-average number of common shares outstanding, including the dilutive effect of the Company’s stock option grants, stock appreciation rights (SAR), warrants, employee stock purchase plan (ESPP) awards and the 2023 Notes, as determined per the treasury stock method.

Effect of Convertible Notes and Related Convertible Note Hedges and Warrants

In connection with the issuance of the 2023 Notes, the Company entered into Convertible Note Hedge and Warrant Transactions as described further in Note 9, Convertible Senior Notes Due 2023. The expected collective impact of the Convertible Note Hedge and Warrant Transactions is to reduce the potential dilution that may occur from the actual conversion of the 2023 Notes between the conversion price of $59.33 per share and the strike price of the warrants of $80.9063 per share.

The 2023 Notes and related Convertible Note Hedge and Warrant Transactions are excluded in the calculation of diluted EPS because their inclusion would be anti-dilutive. The denominator of the diluted EPS calculation excludes additional shares related to the 2023 Notes and warrants since the average price of the Company's common stock was less than the conversion price of the 2023 Notes of $59.33 per share and the strike price of the warrants of $80.9063 per share. Prior to actual conversion for

purposes of calculating diluted earnings per share, the Convertible Note Hedge Transactions are not considered as their impact would be anti-dilutive.

In addition to the above described effect of the 2023 notes and the related Convertible Note Hedge and Warrant Transactions, the Company also excluded the common stock equivalents for outstanding stock-based awards in the calculation of diluted EPS because their inclusion would be anti-dilutive:



	Three Months ended September 30,		Nine Months ended September 30,
	2019	2018	2019	2018
	(unaudited)		(unaudited)
Stock options	1,395,138	165,675	961,605	180,100

The following table sets forth the computation of basic and diluted EPS for the three and nine months ended September 30, 2019 and 2018, in thousands of dollars, except share and per share amounts:



	Three Months ended September 30,				Nine Months ended September 30,
	2019		2018		2019		2018
	(unaudited)				(unaudited)
Numerator, in thousands:
Net earnings	$	28,860	$	28,011	$	79,927	$	85,100

Denominator:
Weighted average shares outstanding, basic	52,453,384		52,227,630		52,392,232		51,897,240

Effect of dilutive securities:
Stock options and SAR	1,352,454		2,012,217		1,506,254		2,201,090
Weighted average shares outstanding, diluted	53,805,838		54,239,847		53,898,486		54,098,330

Earnings per share, basic	$	0.55	$	0.54	$	1.53	$	1.64
Earnings per share, diluted	$	0.54	$	0.52	$	1.48	$	1.57