Net Income Per Share

We compute basic net income per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of common shares issuable upon vesting of restricted stock units, exercise of stock options and ESPP purchase rights, and conversion of the 4.00% Debentures using the treasury stock method.

The following provides the computation of basic and diluted net income per share:



	Three months ended October 31,				Nine months ended October 31,
	2016		2015		2016		2015
Net income attributable to Mentor Graphics shareholders	$	41,762	$	14,679	$	31,763	$	36,006
Adjustment to redemption value of noncontrolling interest with redemption feature	—		133		—		258
Adjusted net income attributable to Mentor Graphics shareholders, basic	41,762		14,812		31,763		36,264
Adjustment for convertible debt interest, net of tax to be forfeited upon conversion of 4.00% Debentures	519		—		—		519
Adjusted net income attributable to Mentor Graphics shareholders	$	42,281	$	14,812	$	31,763	$	36,783

Weighted average common shares used to calculate basic net income per share	108,887		117,759		108,442		116,787
Potentially dilutive common shares	5,225		2,382		2,489		5,176
Weighted average common and potentially dilutive common shares used to calculate diluted net income per share	114,112		120,141		110,931		121,963

Net income per share attributable to Mentor Graphics shareholders:
Basic net income per share	$	0.38	$	0.13	$	0.29	$	0.31
Diluted net income per share	$	0.37	$	0.12	$	0.29	$	0.30

We have adjusted the numerator of our basic and diluted net income per share calculation for the three and nine months ended October 31, 2015 for the adjustment of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings. The effect of the conversion of the 4.00% Debentures was dilutive for the three months ended October 31, 2016 and the nine months ended October 31, 2015. We assume that the excess of the value of the converted shares over the principal amount of the 4.00% Debentures will be settled in common stock for the purposes of calculating the dilutive effect of net income per share. We have adjusted the numerator of our diluted earnings per share calculation for the forfeited interest, net of tax, resulting from the assumed conversion.

The effect of the conversion of the 4.00% Debentures was anti-dilutive for the nine months ended October 31, 2016 and the three months ended October 31, 2015 and therefore excluded from the computation of diluted net income per share. The conversion feature of the 4.00% Debentures, which allows for settlement in cash or a combination of cash and common stock, is further described in Note 6. “Notes Payable.”

The following details the adjustments to net income excluded from the computation of diluted net income per share:



	Three months ended October 31,				Nine months ended October 31,
	2016		2015		2016		2015
Adjustment for convertible debt interest, net of tax to be forfeited upon conversion of 4.00% Debentures	$	—	$	519	$	519	$	—

The following details shares excluded from the computation of diluted net income per share:



	Three months ended October 31,		Nine months ended October 31,
	2016	2015	2016	2015
Shares of common stock for restricted stock units	—	—	1,278	—
Shares of common stock for convertible debt	—	2,695	1,071	—
Total anti-dilutive shares excluded	—	2,695	2,349	—

The stock options and the 4.00% Debentures were determined to be anti-dilutive as a result of applying the treasury stock method.