NOTE 9 – EARNINGS (LOSS) PER COMMON SHARE

Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing income (loss) 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 earnings (loss) per share:

In thousands, except share and per share data
	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Numerator:
Net income (loss) attributable to Stericycle, Inc.	$	39,038		$	64,795		$	(46,815	)	$	187,615
Mandatory convertible preferred stock dividend		8,957			9,726			27,506			29,853
Gain on repurchase of preferred stock		(5,368	)		(6,467	)		(14,390	)		(7,747	)
Numerator for basic earnings (loss) per share attributable to Stericycle, Inc. common shareholders	$	35,449		$	61,536		$	(59,931	)	$	165,509
Denominator:
Denominator for basic earnings (loss) per share - weighted average shares		85,342,955			85,044,303			85,278,783			84,881,452
Effect of diluted securities:
Dilutive effect of stock-based compensation awards		278,229			526,226			—			808,073
Mandatory convertible preferred stock ^(a)		—			—			—			—
Denominator for diluted earnings (loss) per share - adjusted weighted average shares and after assumed exercises ^(b)		85,621,184			85,570,529			85,278,783			85,689,525
Earnings (loss) per share – Basic	$	0.42		$	0.72		$	(0.70	)	$	1.95
Earnings (loss) per share – Diluted ^(b)	$	0.41		$	0.72		$	(0.70	)	$	1.93

(a)

The weighted average common shares issuable upon the assumed conversion of the mandatory convertible preferred stock totaling of 5,048,824 and 5,495,861 for the three months ended September 30, 2017 and 2016, respectively, and 5,152,582 and 5,590,105 for the nine months ended September 30, 2017 and 2016, respectively, were excluded from the computation of diluted earnings (loss) per share as such conversion would have been anti-dilutive.

(b)

Due to the net loss for the nine months ended September 30, 2017 dilutive loss per share is the same as basic.

For the three and nine months ended September 30, 2017, options to purchase shares of 4,742,895 and 4,732,117, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the nine months ended September 30, 2017, 306,765 incremental shares related to stock options were not included in the computation of diluted loss per share because of the net loss during this period.

For the three and nine months ended September 30, 2016, options to purchase shares of 3,595,578 and 2,791,040, respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2017, RSUs of 225,756 and 49,271 respectively, were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. For the nine months ended September 30, 2017, 17,642, incremental shares related to RSUs were not included in the computation of diluted loss per share because of the net loss during the nine months ended September 30, 2017.

For the three and nine months ended September 30, 2016, RSUs of 68,910 and 2,228, 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 nine months ended September 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 earnings (loss) per share calculation for the three and nine months ended September 30, 2017 as the performance conditions were not satisfied as of the end of the respective periods.