L. NET INCOME PER COMMON SHARE

The following table sets forth the computation of basic and diluted net income per common share from continuing and discontinued operations:


	2013		2012		2011
	(in thousands, except per share amounts)
Income from continuing operations	$	164,947	$	217,049	$	343,957
Income from discontinued operations		—		—		1,545
Gain on disposal of discontinued operations		—		—		24,371

Net income for basic and diluted net income per share	$	164,947	$	217,049	$	369,873

Weighted average common shares-basic		190,772		186,878		184,683
Effect of dilutive potential common shares:
Incremental shares from assumed conversion of convertible notes (1)		23,341		22,367		21,504
Convertible note hedge warrant shares (2)		18,795		17,433		16,224
Restricted stock units		1,127		2,291		3,773
Stock options		1,528		1,213		566
Employee stock purchase rights		36		64		70

Dilutive potential common shares		44,827		43,368		42,137

Weighted average common shares-diluted		235,599		230,246		226,820

Net income per common shares-basic:
Continuing operations	$	0.86	$	1.16	$	1.86
Discontinued operations		—		—		0.14

	$	0.86	$	1.16	$	2.00

Net income per common shares-diluted:
Continuing operations	$	0.70	$	0.94	$	1.52
Discontinued operations		—		—		0.11

	$	0.70	$	0.94	$	1.63

(1)

Incremental shares from assumed conversion of the convertible notes are calculated using the difference between the average Teradyne stock price for the period and the conversion price of $5.48, multiplied by the 34.7 million shares that will be issued upon conversion. The result of this calculation, representing the total intrinsic value of the convertible debt, is divided by the average Teradyne stock price for the period.

(2)

Convertible notes hedge warrant shares are calculated using the difference between the average Teradyne stock price for the period and the warrant price of $7.67, multiplied by the 34.7 million shares that will be issued upon exercise. The result of this calculation, representing the total intrinsic value of the warrant, is divided by the average Teradyne stock price for the period. Teradyne’s call option on its common stock (convertible note hedge transaction) is excluded from the calculation of diluted shares because the effect would be anti-dilutive. See Note H: “Debt” regarding convertible note hedge transaction.

The computation of diluted net income per common share for 2013 excludes the effect of the potential exercise of stock options to purchase approximately 0.4 million shares because the effect would have been anti-dilutive.

The computation of diluted net income per common share for 2012 excludes the effect of the potential exercise of stock options to purchase approximately 0.3 million shares and restricted stock units to purchase approximately 0.3 million shares because the effect would have been anti-dilutive.

The computation of diluted net income per common share for 2011 excludes the effect of the potential exercise of stock options to purchase approximately 0.7 million shares because the effect would have been anti-dilutive.

With respect to Teradyne’s convertible debt, Teradyne intends to settle its conversion spread (i.e., the intrinsic value of the embedded option feature contained in the convertible debt) in shares. Teradyne accounts for its conversion spread using the treasury stock method. Teradyne determined that it had the ability and intent to settle the principal amount of the convertible debt in cash; accordingly, the principal amount has been excluded from the determination of diluted earnings per share.