Computation of Earnings Per Share

Basic earnings per share ("EPS") is computed by dividing net earnings by the weighted-average number of common shares outstanding, including restricted stock units (“RSUs”) vested during the period. Diluted earnings per share is computed based on the sum of the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of shares issuable from stock options, unvested RSUs and the 3.25% Convertible Senior Notes due 2020 (“Convertible Senior Notes”). Potentially dilutive common shares from outstanding stock options and unvested RSUs are determined using the average share price for each period under the treasury stock method. Potentially dilutive shares from the Convertible Senior Notes are determined using the if-converted method. Under the provisions of the if-converted method, the Convertible Senior Notes are assumed to be converted and included in the denominator of the EPS calculation and the interest expense, net of tax, recorded in connection with the Convertible Senior Notes is added back to net income.

The Convertible Senior Notes have a dilutive impact when the average market price of the Company’s common stock exceeds the applicable conversion price of the notes. The Senior Convertible Notes were convertible as of March 31, 2018 and were not convertible as of March 31, 2017.

The following table reconciles net income and the weighted-average shares used in computing basic and diluted earnings per share in the respective periods (in thousands):



	Three months ended March 31,
	2018		2017
Numerator:
Net income used for basic earnings per share	$	33,958	$	14,290
Interest expense on Convertible Senior Notes, net of tax	2,144		—
Net income used for diluted earnings per share, if-converted method	$	36,102	$	14,290

Basic weighted-average common shares outstanding	35,236		33,202
Potentially dilutive shares issuable from Convertible Senior Notes, if-converted	4,957		—
Potentially dilutive shares issuable from stock options and unvested RSUs	1,755		796
Diluted weighted-average common shares outstanding, if-converted	41,948		33,998
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	193		1,972

Potentially dilutive shares excluded from the calculation above represent stock options when the combined exercise price and unrecognized stock-based compensation are greater than the average market price for the Company’s common stock because their effect is anti-dilutive.