Net Loss per Share

3 Months Ended

Mar. 31, 2014

Net Loss per Share

Net Loss per Share

L. Net Loss per Share

We compute basic net loss per share by dividing net loss by the weighted average number of common shares outstanding during the relevant period.

In February 2014, in connection with the issuance of the Convertible Notes, we entered into convertible bond hedges. The convertible bond hedges are not included for purposes of calculating the number of diluted shares outstanding, as their effect would be anti-dilutive. The convertible bond hedges are generally expected, but not guaranteed, to reduce the potential dilution and/or offset the cash payments we are required to make upon conversion of the Convertible Notes. See Note P, “Debt,” for additional information. As we have a choice to settle the conversion obligation under the Convertible Notes in cash, shares or any combination of the two, we have determined that we intend to settle the accreted principal value of the Convertible Notes in cash and the excess conversion premium in shares. While the dilutive effect of the conversion premium will be considered in the calculation of diluted net income per share using the treasury stock method, the accreted principal value of the Convertible Notes will not be included in the calculation of diluted income per share, as we intend to settle this in cash.

The components of basic and diluted net loss per share were as follows (in thousands, except per share data):

	Three Months Ended March 31,
	2014			2013
Net loss	$	(7,102	)	$	(3,895	)
Weighted average common shares outstanding	21,824			21,544
Net loss per share:
Basic and diluted	$	(0.33	)	$	(0.18	)

The following table sets forth the potential common shares issuable upon the exercise of outstanding options, the vesting of RSUs and warrants (prior to consideration of the treasury stock method), which were excluded from our computation of diluted net loss per share because such instruments were anti-dilutive (in thousands):

	Three Months Ended March 31,
	2014	2013
Options to purchase shares of common stock	3,335	2,750
Shares of common stock issuable upon the vesting of restricted stock units	481	510
Warrants	7,382	—
Total	11,198	3,260

We have determined that we have the intent and ability to settle the debt component of the Convertible Notes in cash and the excess conversion spread in shares. Therefore, the effect of the Convertible Notes reflected in diluted earnings per share is limited to the conversion premium, which is reflected in the calculation of diluted earnings per share as if it were a freestanding written call option on our shares. During the three months ended March 31, 2014, the weighted average common stock price was below the conversion price of the Convertible Notes.

The dilutive effect of the stock options, RSUs, and warrants is calculated using the treasury stock method. During the three months ended March 31, 2014, the warrants were excluded from diluted shares outstanding because the weighted average common stock price was below the exercise price.