NOTE 11 – 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 impact of the Series A prior to conversion on September 14, 2018. 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 Series A, we used the "if-converted method", weighted for the period prior to conversion. Under the if-converted method, the preferred dividend applicable to Series A was added back as an adjustment to the numerator. The Series A shares were assumed to be converted to common shares at the beginning of the period or, if later, at the time of issuance, and for periods including the conversion date of September 14, 2018 these common shares are weighted for the period the Series A was outstanding with the resulting weighted average common shares included in the denominator. In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted earnings per share 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 millions, except per share data
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
Numerator:
Net income (loss) attributable to Stericycle, Inc.	$	23.5		$	39.0		$	73.7		$	(46.8	)
Mandatory convertible preferred stock dividend		(8.4	)		(8.9	)		(25.5	)		(27.5	)
Gain on repurchases of preferred stock		2.4			5.4			16.9			14.4
Numerator for basic earnings (loss) per share attributable to Stericycle, Inc. common shareholders	$	17.5		$	35.5		$	65.1		$	(59.9	)
Denominator:
Denominator for basic earnings (loss) per share - weighted average shares ⁽¹⁾		86.7			85.3			85.9			85.3
Effect of dilutive securities:
Stock-based compensation awards		0.1			0.3			0.2			-
Mandatory convertible preferred stock ⁽²⁾		-			-			-			-
Denominator for diluted earnings (loss) per share - adjusted weighted average shares and after assumed exercises		86.8			85.6			86.1			85.3
Earnings (loss) per share – Basic	$	0.20		$	0.42		$	0.76		$	(0.70	)
Earnings (loss) per share – Diluted ⁽³⁾	$	0.20		$	0.41		$	0.76		$	(0.70	)

⁽¹⁾

For the three and nine months ended September 30, 2018, respectively, the denominator for basic earnings per share includes 0.8 million and 0.3 million shares, respectively, representing the weighted-average impact of the common shares outstanding subsequent to the Series A conversion on September 14, 2018.

⁽²⁾

The weighted average common shares (in thousands) issuable upon the assumed conversion (as discussed above) of the Series A totaling 3,918 and 5,049 for the three months ended September 30, 2018 and 2017, respectively, and 4,526 and 5,152 for the nine months ended September 30, 2018 and 2017, respectively, were excluded from the computation of diluted earnings (loss) per share as such conversion would have been anti-dilutive.

⁽³⁾

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, 2018, options to purchase shares (in thousands) of 4,631 and 4,697, 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, options to purchase shares (in thousands) of 4,743 and 4,732, respectively, were not included in the computation of diluted loss per share because the effect would have been anti-dilutive. For the three months ended September 30, 2017, 307 incremental shares (in thousands) 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, 2018, RSUs (in thousands) of 151 and 47, 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 (in thousands) of 226 and 49, respectively, were not included in the computation of diluted loss per share because the effect would have been anti-dilutive. For the nine months ended September 30, 2017, incremental shares related to RSUs (in thousands) of 18 were not included in the computation of diluted loss per share because of the net loss during this period.

During the three and nine months ended September 30, 2018 and 2017, all of the Company’s outstanding PSUs were 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 were excluded from the earnings (loss) per share calculation for the three and nine months ended September 30, 2018 and 2017 as the performance conditions were not satisfied as of the end of the respective periods.