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.

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



	Three months ended October 31,					Nine months ended October 31,
	2015		2014			2015		2014
Net income attributable to Mentor Graphics shareholders	$	14,679	$	21,030		$	36,006	$	32,651
Adjustment to redemption value of noncontrolling interest with redemption feature	133		(267		)	258		1,295
Adjusted net income attributable to Mentor Graphics shareholders, basic	14,812		20,763			36,264		33,946
Adjustment for convertible debt interest, net of tax to be forfeited upon conversion of 4.00% Debentures	—		—			519		—
Adjusted net income attributable to Mentor Graphics shareholders, diluted	$	14,812	$	20,763		$	36,783	$	33,946

Weighted average common shares used to calculate basic net income per share	117,759		114,405			116,787		114,399
Employee stock options, restricted stock units, employee stock purchase plan and convertible debt	2,382		2,310			5,176		2,529
Weighted average common and potential common shares used to calculate diluted net income per share	120,141		116,715			121,963		116,928

Net income per share attributable to Mentor Graphics shareholders:
Basic net income per share	$	0.13	$	0.18		$	0.31	$	0.30
Diluted net income per share	$	0.12	$	0.18		$	0.30	$	0.29

We have adjusted the numerator of our basic and diluted earnings per share calculation for the adjustment 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 dilutive for the nine months ended October 31, 2015. 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. We have adjusted the numerator of our diluted earnings per share calculation for the forfeited interest, net of tax, resulting from the assumed conversion.

The effect of the conversion of the 4.00% Debentures was anti-dilutive for the three months ended October 31, 2015 and the three and nine months ended October 31, 2014 and therefore excluded from the computation of diluted net income per share. The conversion feature of the 4.00% Debentures, which allows for settlement in cash or a combination of cash and common stock, is further described in Note 5. “Notes Payable.”

The following details adjustments to net income excluded from the computation of diluted net income:



	Three months ended October 31,				Nine months ended October 31,
	2015		2014		2015		2014
Adjustment for convertible debt interest, net of tax to be forfeited upon conversion of 4.00% Debentures	$	519	$	519	$	—	$	519

The following details shares excluded from the computation of diluted net income:



	Three months ended October 31,		Nine months ended October 31,
	2015	2014	2015	2014
Shares of common stock for restricted stock units	—	1,657	—	1,138
Shares of common stock for stock options	—	20	—	51
Shares of common stock for convertible debt	2,695	354	—	476
Total anti-dilutive shares excluded	2,695	2,031	—	1,665

These stock options, restricted stock units, and convertible debt were determined to be anti-dilutive as a result of applying the treasury stock method.