NOTE 8 – EARNINGS PER COMMON SHARE

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan, RSUs, and the assumed conversion of mandatory convertible preferred stock. The effect of potentially dilutive securities is reflected in diluted earnings per share by application of the “treasury stock method” for outstanding restricted stock awards and stock options. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. For the issue of the mandatory convertible preferred stock, we use the “if-converted method”. Under the if-converted method, the preferred dividend applicable to convertible preferred stock is added back as an adjustment to the numerator. The Mandatory Convertible Preferred shares are assumed to be converted to common shares at the beginning of the period or, if later, at the time of issuance, and the resulting common shares are included in the denominator. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The numerator is also adjusted for any premium or discount arising from redemption of the preferred stock.

The following table sets forth the computation of basic and diluted earnings per share:

In thousands, except share and per share data
	Three Months Ended June 30,					Six Months Ended June 30,
	2016			2015 (Restated)		2016			2015 (Restated)
Numerator:
Net income attributable to Stericycle, Inc.	$	46,034		$	87,830	$	122,820		$	116,770
Less: mandatory convertible preferred stock dividend		10,021			—		20,127			—
Less: gain on repurchase of preferred stock		(1,280	)		—		(1,280	)		—
Numerator for basic earnings per share attributable to Stericycle, Inc. common shareholders	$	37,293		$	87,830	$	103,973		$	116,770
Denominator:
Denominator for basic earnings per share-weighted average shares		84,893,263			84,961,907		84,799,131			85,000,723
Effect of diluted securities:
Employee stock based awards		867,423			1,259,127		999,761			1,292,093
Mandatory convertible preferred stock (1)		—			—		—			—
Denominator for diluted earnings per share-adjusted weighted average shares and after assumed exercises		85,760,686			86,221,034		85,798,892			86,292,816
Earnings per share – Basic	$	0.44		$	1.03	$	1.23		$	1.37
Earnings per share – Diluted	$	0.43		$	1.02	$	1.21		$	1.35

(1)

The weighted average common shares issuable upon the assumed conversion of the mandatory convertible preferred stock totaling 5,624,139 and 5,637,757 shares for the three and six months ended June 30, 2016, respectively, were excluded from the computation of diluted earnings per share as such conversion would have been antidilutive.

For additional information regarding outstanding employee stock options, see Note 6 - Stock Based Compensation.