4. INCOME PER SHARE:

The weighted average number of common shares outstanding is calculated as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Weighted average shares outstanding—basic		50,524		46,546		51,392		48,073
Effect of dilutive stock-based compensation		460		—		503		—
Effect of convertible notes		5,416		—		6,187		—
Effect of common stock warrants		3,702		—		4,631		—

Weighted average shares outstanding—diluted		60,102		46,546		62,713		48,073

For the three months and nine months ended September 30, 2012, the effect of dilutive stock-based compensation awards was the equivalent of approximately 0.7 million shares of common stock outstanding. Because the Company had a loss from continuing operations in the three months and nine months ended September 30, 2012, these incremental shares were excluded from the computation of dilutive earnings per share for those periods as the effect of their inclusion would have been anti-dilutive.

The Company had stock-based compensation awards outstanding with respect to approximately 0.2 million and 0.8 million shares of common stock for the three months ended September 30, 2013 and 2012, respectively, and approximately 0.1 million and 0.9 million shares of common stock for the nine months ended September 30, 2013 and 2012, respectively, that could potentially dilute earnings per share in the future but were excluded from the computation of diluted earnings per share for the respective periods as the effect of their inclusion would have been anti-dilutive.

As discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, in 2009 the Company issued 3.75% Convertible Senior Notes due 2014 (the “Convertible Notes”). The Company intends to settle the outstanding face value of the Convertible Notes in cash upon conversion/maturity. Any conversion spread associated with the conversion/maturity of the Convertible Notes may be settled in cash or shares of the Company’s common stock. The effect of potentially issuable shares under this conversion spread for the three months and nine months ended September 30, 2012 was the equivalent of approximately 4.0 million and 2.7 million shares, respectively, of common stock outstanding. Because the Company had a loss from continuing operations in the three months and nine months ended September 30, 2012, these incremental shares were excluded from the computation of diluted earnings per share for those periods as the effect of their inclusion would have been anti-dilutive. The Convertible Notes are currently convertible through December 31, 2013; however, other than as described in Note 8, the Company has not settled the conversion of any of the Convertible Notes.

In connection with the issuance of the Convertible Notes, the Company sold common stock purchase warrants to counterparties affiliated with the initial purchasers of the Convertible Notes whereby the warrant holders may purchase shares of the Company’s stock. As of September 30, 2013, approximately 14.1 million shares of the Company’s common stock were issuable pursuant to the warrants, with an adjusted strike price of $25.96 per share, which reflects the proportionate reduction in the number of warrants associated with the Company’s repurchase of a portion of its Convertible Notes, as described in Note 8, and the adjustments made in connection with the dividend paid by the Company on October 15, 2013. The number of shares underlying the warrants and the strike price thereof are subject to further anti-dilution adjustments, including for quarterly cash dividends paid by the Company. If the average closing price of the Company’s stock during a reporting period exceeds this strike price, these warrants will be dilutive. The warrants may only be settled in shares of the Company’s common stock. The effect of potentially issuable shares under these warrants for the three months and nine months ended September 30, 2012 was the equivalent of approximately 2.1 million and 0.6 million shares, respectively, of common stock outstanding. Because the Company had a loss from continuing operations in the three months and nine months ended September 30, 2012, these incremental shares were excluded from the computation of diluted earnings per share for those periods as the effect of their inclusion would have been anti-dilutive.

In June 2013, the Company entered into agreements with the note hedge counterparties to proportionately reduce the number of Purchased Options (as defined below) and the warrants as described in Note 8. These agreements were considered modifications to the Purchased Options and the warrants, and based on the terms of the agreements, the Company recognized a charge of $4.9 million in the nine months ended September 30, 2013, which is recorded as an increase to accumulated deficit and additional paid-in-capital in the accompanying condensed consolidated balance sheets. This charge also represents a deduction from net income in calculating net income available to common shareholders and earnings per share available to common shareholders in the accompanying condensed consolidated statements of operations.