Computation of Earnings Per Share

3 Months Ended

Mar. 31, 2020

Basic earnings per share (“EPS”) is computed by dividing net income by the weighted-average number of common shares outstanding, including restricted stock units (“RSUs”) vested during the period. Diluted EPS 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 became convertible on March 31, 2018 and remained convertible through March 31, 2020.

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


	Three Months Ended March 31,
	2020		2019
Numerator:
Net income used for basic earnings per share	$	40,237	$	24,844
Interest expense on Convertible Senior Notes, net of tax	181		791
Net income used for diluted earnings per share, if-converted method	$	40,418	$	25,635

Basic weighted-average common shares outstanding	42,056		39,704
Dilutive potential shares issuable from Convertible Senior Notes	410		1,825
Dilutive potential shares issuable from stock options and unvested RSUs	937		1,378
Diluted weighted-average common shares outstanding, if-converted	43,403		42,907
Potentially dilutive shares excluded from calculation due to anti-dilutive effect	97		149

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.