Earnings Per Share

9 Months Ended

Sep. 30, 2020

Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise or settlement of stock awards and shares issuable under the employee stock purchase plan (calculated using the treasury stock method) during the period they were outstanding and potential dilutive common shares from the conversion spread on the Company’s 0.500% Convertible Notes due 2019 (the “Convertible Notes”) and the Company's warrants during the period they were outstanding.

The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share information):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Numerator:


Net income	$	98,227	$	270,857	$	392,355	$	474,700
Denominator:
Denominator for basic earnings per share - weighted-average shares outstanding	123,255		130,277		123,835		131,020
Effect of dilutive employee stock awards	2,608		1,823		2,572		2,050

Effect of dilutive Convertible Notes	—		—		—		1,901
Effect of dilutive warrants	—		555		—		1,326
Denominator for diluted earnings per share - weighted-average shares outstanding	125,863		132,655		126,407		136,297




Basic earnings per share	$	0.80	$	2.08	$	3.17	$	3.62




Diluted earnings per share	$	0.78	$	2.04	$	3.10	$	3.48

For the three and nine months ended September 30, 2020, there were no weighted-average number of shares outstanding used in the computation of diluted earnings per share for the Company's warrants, as they expired on November 18, 2019. For the three and nine months ended September 30, 2019, the weighted-average number of shares outstanding used in the computation of diluted earnings per share includes the dilutive effect of the Company's warrants, as the average stock price during the quarters was above the weighted-average warrant strike price of $94.18 per share and $94.52 per share, respectively. Anti-dilutive stock-based awards excluded from the calculations of diluted earnings per share were immaterial during the periods presented.

The Company used the treasury stock method for calculating any potential dilutive effect of the conversion spread on its Convertible Notes on diluted earnings per share because upon conversion the Company paid cash up to the aggregate principal amount of the Convertible Notes converted and delivered shares of common stock in respect of the remainder of the Company’s conversion obligation in excess of the aggregate principal amount of the Convertible Notes converted. The conversion spread had a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given

period exceeded the conversion price. For the three and nine months ended September 30, 2020, and the three months ended September 30, 2019, there was no dilution as the Convertible Notes matured on April 15, 2019. For the nine months ended September 30, 2019, the average market price of the Company's common stock exceeded the conversion price; therefore, the dilutive effect of the Convertible Notes was included in the denominator of diluted earnings per share.