Note 9 – Earnings Per Share

The shares used in the computation of the Company’s basic and diluted earnings per common share are reconciled as follows:


(In thousands)	Three Months Ended May 31,				Nine Months Ended May 31,
(In thousands)	2016		2015		2016		2015
Weighted average basic common shares outstanding ⁽¹⁾		29,059		27,842		29,182		27,514
Dilutive effect of 2018 Convertible notes ⁽²⁾		3,224		5,155		3,202		5,745
Dilutive effect of 2026 Convertible notes ⁽³⁾		—		3		—		3
Dilutive effect of performance based restricted stock units ⁽⁴⁾		59		—		91		—

Weighted average diluted common shares outstanding		32,342		33,000		32,475		33,262

(1)

Restricted stock grants and restricted stock units, including some grants subject to certain performance criteria, are included in weighted average basic common shares outstanding when the Company is in a net earnings position.

(2)

The dilutive effect of the 2018 Convertible notes was included for the three and nine months ended May 31, 2016 and 2015 as they were considered dilutive under the “if converted” method as further discussed below.

(3)

The dilutive effect of the 2026 Convertible notes was excluded for the three and nine months ended May 31, 2016 as the average stock price was less than the conversion price of $47.15 and therefore was considered anti-dilutive. The effect of the 2026 Convertible notes was included for the three and nine months ended May 31, 2015 as the average stock price was greater than the applicable conversion price, as further described below.

(4)

Restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved, are included in weighted average diluted common shares outstanding when the Company is in a net earnings position.

Dilutive EPS is calculated using the more dilutive of two approaches. The first approach includes the dilutive effect, using the treasury stock method, associated with shares underlying the 2026 Convertible notes and performance based restricted stock units that are subject to performance criteria, for which actual levels of performance above target have been achieved. The second approach supplements the first by including the “if converted” effect of the 2018 Convertible notes issued in March 2011. Under the “if converted” method, debt issuance and interest costs, both net of tax, associated with the convertible notes are added back to net earnings and the share count is increased by the shares underlying the convertible notes. The 2026 Convertible notes are included in the calculation of both approaches using the treasury stock method when the average stock price is greater than the applicable conversion price.


	Three Months Ended May 31,				Nine Months Ended May 31,
	2016		2015		2016		2015
Net earnings attributable to Greenbrier	$	35,352	$	42,811	$	149,653	$	125,948
Add back:
Interest and debt issuance costs on the 2018 Convertible notes, net of tax		733		1,234		1,962		4,066

Earnings before interest and debt issuance costs on convertible notes	$	36,085	$	44,045	$	151,615	$	130,014

Weighted average diluted common shares outstanding		32,342		33,000		32,475		33,262
Diluted earnings per share ⁽¹⁾	$	1.12	$	1.33	$	4.67	$	3.91

(1)

Diluted earnings per share was calculated as follows:

Earnings before interest and debt issuance costs (net of tax) on convertible notes

Weighted average diluted common shares outstanding