Income Per Share

6 Months Ended

Jun. 30, 2015

3. INCOME PER SHARE:

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2015		2014		2015		2014
Weighted average shares outstanding – basic		51,269		50,814		51,196		50,719
Effect of dilutive stock-based compensation		332		464		366		519
Effect of convertible notes		—		6,033		—		5,798
Effect of common stock warrants		—		3,224		—		3,042

Weighted average shares outstanding – diluted		51,601		60,535		51,562		60,078

As discussed more fully in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, in 2009 the Company issued 3.75% Convertible Senior Notes due 2014 (the “Convertible Notes”). The Company settled the outstanding face value of the Convertible Notes in cash at maturity on October 1, 2014. The conversion spread associated with the conversion of the Convertible Notes was settled in shares of the Company’s common stock. Pursuant to a purchased call option, or note hedge, the Company also received and cancelled an equal number of shares of its common stock at maturity.

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 could purchase shares of the Company’s stock. At separate times during 2014, the Company modified the agreements with each of the counterparties to cash settle the warrants as described in Note 7. As a result of these modifications, the warrants were settled in cash during 2014 and the first quarter of 2015 and did not affect the calculation of diluted earnings per share for the three months and six months ended June 30, 2015.

In May and June 2014, the Company modified the agreements with note hedge counterparties to cash settle a portion of the warrants as described in Note 7. In April 2014, the Company entered into agreements with the note hedge counterparties to proportionately reduce the number of purchased call options and the warrants discussed above in conjunction with a repurchase of a portion of the Convertible Notes. Each of these agreements were considered modifications to the purchased call options and warrants (as applicable), and based on the terms of the agreements, the Company recognized a charge of $5.0 million in the three months and six months ended June 30, 2014. This charge was recorded as an increase to accumulated deficit and derivative liability, as the liability was settled in cash. These charges also represent 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.