NOTE 8 – (LOSS) EARNINGS PER COMMON SHARE

Basic (loss) earnings per share is computed by dividing (loss) income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted (loss) earnings per share is computed by dividing (loss) income available to common shareholders by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the Company’s employee stock purchase plan, RSUs, PSUs, and the assumed conversion of mandatory convertible preferred stock. The effect of potentially dilutive securities is reflected in diluted earnings per share by application of the "treasury stock method" for outstanding stock-based compensation awards. Under the treasury stock method, an increase in the fair market value of the Company’s common stock can result in a greater dilutive effect from potentially dilutive securities. For the issue of the mandatory convertible preferred stock, we use the "if-converted method." Under the if-converted method, the preferred dividend applicable to convertible preferred stock is added back as an adjustment to the numerator. The mandatory convertible preferred shares are assumed to be converted to common shares at the beginning of the period or, if later, at the time of issuance, and the resulting common shares are included in the denominator. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. The numerator is also adjusted for any premium or discount arising from redemption of the preferred stock.

The following table sets forth the computation of basic and diluted (loss) earnings per share:

In thousands, except share and per share data
	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Numerator:
Net (loss) income attributable to Stericycle, Inc.	$	(144,042	)	$	46,034		$	(85,853	)	$	122,820
Mandatory convertible preferred stock dividend		9,185			10,021			18,549			20,127
Gain on repurchase of preferred stock		(4,459	)		(1,280	)		(9,022	)		(1,280	)
Numerator for basic (loss) earnings per share attributable to Stericycle, Inc. common shareholders	$	(148,768	)	$	37,293		$	(95,380	)	$	103,973
Denominator:
Denominator for basic (loss) earnings per share – weighted average shares		85,271,699			84,893,263			85,246,105			84,799,131
Effect of diluted securities:
Dilutive effect of stock-based compensation awards		—			867,423			—			999,761
Mandatory convertible preferred stock ^(a)		—			—			—			—
Denominator for diluted (loss) earnings per share - adjusted weighted average shares and after assumed exercises ^(b)		85,271,699			85,760,686			85,246,105			85,798,892
(Loss) earnings per share – Basic	$	(1.74	)	$	0.44		$	(1.12	)	$	1.23
(Loss) earnings per share – Diluted ^(b)	$	(1.74	)	$	0.43		$	(1.12	)	$	1.21

(a)

The weighted average common shares issuable upon the assumed conversion of the mandatory convertible preferred stock totaling of 5,151,160 and 5,624,139 for the three months ended June 30, 2017 and 2016, respectively, and 5,207,080 and 5,637,757 for the six months ended June 30, 2017 and 2016, respectively, were excluded from the computation of diluted (loss) earnings per share as such conversion would have been anti-dilutive.

(b)

Due to the net loss for the three and six months ended June 30, 2017, dilutive loss per share is the same as basic.

For the three and six months ended June 30, 2017, options to purchase shares of 4,776,294 and 4,713,228, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the three and six months ended June 30, 2017, 327,336 and 328,984, respectively, incremental shares related to stock options were not included in the computation of diluted loss per share because of the net loss during the three and six months ended June 30, 2017.

For the three and six months ended June 30, 2016, options to purchase shares of 2,961,595 and 2,662,834, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

For the three and six months ended June 30, 2017, RSUs of 45,597 and 47,617 respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the three and six months ended June 30, 2017, 20,729 and 19,709, respectively, incremental shares related to RSUs were not included in the computation of diluted loss per share because of the net loss during the three and six months ended June 30, 2017.

For the three and six months ended June 30, 2016, RSUs of 650 and 500, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

The Company had outstanding PSUs during the three and six months ended June 30, 2017 that were eligible to vest into a maximum of 10,348 shares of common stock subject to the achievement of specified performance conditions. Contingently issuable shares are excluded from the computation of diluted earnings per share if, based on current period results, the shares would not be issuable if the end of the reporting period were the end of the contingency period. These outstanding PSUs have been excluded from the loss per share calculation for the three and six months ended June 30, 2017 as the performance conditions were not satisfied as of the end of the period.