NOTE 12 – 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, PSUs 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 stock-based compensation awards. 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 earnings per share 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 millions, except per share data
	Three Months Ended March 31,
	2018			2017
Numerator:
Net income attributable to Stericycle, Inc.	$	22.5		$	58.2
Mandatory convertible preferred stock dividend		(8.8	)		(9.4	)
Gain on repurchase of preferred stock		7.3			4.6
Numerator for basic earnings per share attributable to Stericycle, Inc. common shareholders	$	21.0		$	53.4
Denominator:
Denominator for basic earnings per share - weighted average shares		85.5			85.2
Effect of dilutive securities:
Stock-based compensation awards		0.3			0.4
Mandatory convertible preferred stock ⁽¹⁾		-			-
Denominator for diluted earnings per share - adjusted weighted average shares and after assumed exercises		85.8			85.6
Earnings per share – Basic	$	0.25		$	0.63
Earnings per share – Diluted	$	0.25		$	0.62

₍₁₎

For the three months ended March 31, 2018 and 2017, the weighted average common shares (in thousands) issuable upon the assumed conversion of the mandatory convertible preferred stock totaling 4,903, and 5,264, respectively, were excluded from the computation of diluted earnings per share as such conversion would have been anti-dilutive.

For the three months ended March 31, 2018 and 2017, options to purchase shares (in thousands) of 4,700 and 4,660, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

For the three months ended March 31, 2018 and 2017, RSUs (in thousands) of 51 and 135, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

During the three months ended March 31, 2018 and 2017, all of the Company’s outstanding PSUs are subject to the achievement of specified performance conditions. Contingently issuable shares are excluded from the computation of diluted earnings per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period. These outstanding PSUs were excluded from the earnings per share calculation for the three months ended March 31, 2018 and 2017, as the performance conditions were not satisfied as of the end of the respective periods.