4. Net (Loss) Income per Share



Net (Loss) Income per Basic and Diluted Share	Year Ended December 31,
(in thousands, except per share amounts)	2018			2017		2016
Numerator
(Loss) income attributable to the PDL’s shareholders used to compute net (loss) income per basic and diluted share	$	(68,859	)	$	110,748	$	63,606

Denominator
Total weighted-average shares used to compute net (loss) income attributable to PDL's shareholders, per basic share	145,669			155,394		163,805
Restricted stock outstanding	—			863		387
Shares used to compute net (loss) income attributable to PDL’s shareholders, per diluted share	145,669			156,257		164,192

Net (loss) income attributable to PDL’s shareholders, per share - basic	$	(0.47	)	$	0.71	$	0.39
Net (loss) income attributable to PDL’s shareholders, per share - diluted	$	(0.47	)	$	0.71	$	0.39

The computation of basic earnings per share (“EPS”) is based on the weighted-average number of the Company’s common shares outstanding. The computation of diluted EPS is based on the weighted-average number of the Company’s common shares outstanding and dilutive potential common shares, which may be issued pursuant to outstanding stock options and restricted stock awards using the treasury stock method, and the 4.0% Convertible Senior Notes due February 1, 2018 (the “February 2018 Notes”) that were repaid on February 1, 2018 and the 2.75% Convertible Senior Notes due December 1, 2021 (the “December 2021 Notes”), in each case, for the period that the notes were outstanding, including, if applicable, the effect of adding back interest expense and the underlying shares using the if converted method.

December 2021 Notes Capped Call Potential Dilution

In November 2016, the Company issued $150.0 million in aggregate principal of the December 2021 Notes, which provide in certain situations for the conversion of the outstanding principal amount of the December 2021 Notes into shares of the Company’s common stock at a predefined conversion rate. For additional information on the conversion rates on the Company’s convertible debt, see Note 16, Term Loan and Convertible Senior Notes. In conjunction with the issuance of the December 2021 Notes, the Company entered into a capped call transaction, with a hedge counterparty. The capped call transaction is expected generally to reduce the potential dilution, and/or offset, to an extent, the cash payments the Company may choose to make in excess of the principal amount, upon conversion of the December 2021 Notes. The Company has excluded the capped call transaction from the net (loss) income per diluted share computation as such securities would have an anti-dilutive effect and those securities should be considered separately rather than in the aggregate in determining whether their effect on net (loss) income per diluted share would be dilutive or anti-dilutive. For additional information regarding the capped call transaction related to the Company’s December 2021 Notes; see Note 16, Term Loan and Convertible Senior Notes.

Anti-Dilutive Effect of Stock Options and Restricted Stock Awards

For the years ended December 31, 2018 and 2017, the Company excluded approximately 3,892,000 and 502,000 shares underlying outstanding stock options, respectively, calculated on a weighted-average basis, from the Company’s net (loss) income per diluted share calculations because their effect was anti-dilutive. There were no outstanding options for the year ended December 31, 2016. For the years ended December 31, 2018, 2017 and 2016, the Company excluded approximately 1,139,000, 1,830,000, and 1,107,000 shares, respectively, underlying restricted stock awards, calculated on a weighted-average basis, from the Company’s net (loss) income per diluted share calculations because their effect was anti-dilutive.