Earnings Per Share

3 Months Ended

Mar. 31, 2022

COMMON STOCK AND EARNINGS PER SHARE

Earnings per Share

On January 1, 2022 the Company adopted ASU 2020-06 as discussed in Note A. As a result, diluted earnings per share of common stock for the 2022 periods excludes interest charges related to the convertible debt and

includes the number of shares that would have been converted at the beginning of the period under the "if-convert" method. The calculation of basic and diluted earnings per share of common stock are as follows (in thousands, except per share amounts):


	Three Months Ending
	March 31,
	2022		2021
Numerator:
Earnings from continuing operations - basic	$	49,796	$	42,290
Loss (gain) from stock warrants revaluation, net of tax	—		(5,355)
Convertible debt interest charge net of tax	760		—
Earnings from continuing operations - diluted	$	50,556	$	36,935

Denominator:
Weighted-average shares outstanding for basic earnings per share	73,888		59,447
Common equivalent shares:
Effect of stock-based compensation awards and warrants	6,745		15,297
Effect of convertible debt	8,111		—
Weighted-average shares outstanding assuming dilution	88,744		74,744
Basic earnings per share from continuing operations	$	0.67	$	0.71
Diluted earnings per share from continuing operations	$	0.57	0.49

Basic weighted average shares outstanding for purposes of basic earnings per share are less than the shares outstanding due to 392,039 shares and 487,200 shares of restricted stock for 2022 and 2021, respectively, which are accounted for as part of diluted weighted average shares outstanding in diluted earnings per share.

The determination of diluted earnings per share requires the exclusion of the fair value re-measurement of the stock warrants recorded as a liability (see Note C), if such warrants have an anti-dilutive effect on earnings per share. The dilutive effect of the weighted-average diluted shares outstanding is calculated using the treasury method for periods in which equivalent shares have a dilutive effect on earnings per share. Under this method, the number of diluted shares is determined by dividing the assumed proceeds of the warrants recorded as a liability by the average stock price during the period and comparing that amount with the number of corresponding warrants outstanding.

In conjunction with the offering of the Convertible Notes (see note F), the Company also sold warrants for ATSG common stock, subject to customary anti-dilution adjustments. The amount received for these warrants and recorded in Stockholders' Equity in the Company’s consolidated balance sheets was $38.5 million. These warrants may result in 8.1 million additional shares of common stock, if ATSG's traded market price exceeds the strike price which is $41.35 per share and is subject to certain adjustments under the terms of the warrant transactions.