Net Income Per Share

We compute basic net income (loss) per share using the weighted average number of common shares outstanding during the period. We compute diluted net income per share using the weighted average number of common shares and potentially dilutive common shares outstanding during the period. Potentially dilutive common shares consist of common shares issuable upon vesting of restricted stock units, exercise of stock options and ESPP purchase rights, and conversion of the 4.00% Debentures using the treasury stock method, if dilutive.

The following provides the computation of basic and diluted net income per share:



	Three months ended July 31,					Six months ended July 31,
	2015			2014		2015		2014
Net income attributable to Mentor Graphics shareholders	$	31,212		$	14,172	$	21,327	$	11,621
Adjustment to redemption value of non-controlling interest with redemption feature	(144		)	895		125		1,562
Adjusted net income attributable to Mentor Graphics shareholders	$	31,068		$	15,067	$	21,452	$	13,183
Weighted average common shares used to calculate basic net income per share	116,584			113,868		116,296		114,396
Employee stock options, restricted stock units and employee stock purchase plan	2,784			2,683		2,690		2,564
Weighted average common and potential common shares used to calculate diluted net income per share	119,368			116,551		118,986		116,960
Net income per share attributable to Mentor Graphics shareholders:
Basic net income per share	$	0.27		$	0.13	$	0.18	$	0.12
Diluted net income per share	$	0.26		$	0.13	$	0.18	$	0.11

We excluded from the computation of diluted net income per share no shares of common stock for the three months ended July 31, 2015 and 583 shares of common stock for restricted stock units and ESPP purchase rights for the six months ended July 31, 2015 compared to 20 shares of common stock for stock options for the three months ended July 31, 2014 and 701 shares of common stock for stock options and ESPP purchase rights for the six months ended July 31, 2014. These stock options, restricted stock units, and ESPP purchase rights were determined to be anti-dilutive as a result of applying the treasury stock method.

We have decreased the numerator of our basic and diluted earnings per share calculation by $(144) for the three months ended July 31, 2015 for the increase of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings. We have increased the numerator of our basic and diluted earnings per share calculation by $125 for the six months ended July 31, 2015, $895 for the three months ended July 31, 2014 and $1,562 for the six months ended July 31, 2014 for the decrease of the noncontrolling interest with redemption feature to its calculated redemption value, recorded directly to retained earnings.

The effect of the conversion of the 4.00% Debentures was anti-dilutive and therefore excluded from the computation of diluted net income per share. We assume that the excess of the value of the converted shares over the principal amount of the 4.00% Debentures will be settled in common stock for purposes of calculating the dilutive effect on net income per share. If the 4.00% Debentures had been dilutive we would have included additional income and additional incremental shares as shown in the following table:



	Three months ended July 31,				Six months ended July 31,
	2015		2014		2015		2014
Additional income	$	2,075	$	2,075	$	2,075	$	2,075
Additional incremental shares	2,825		521		2,489		538

The conversion feature of the 4.00% Debentures, which allows for settlement in cash or a combination of cash and common stock, are further described in Note 5. “Notes Payable.”