Earnings Per Share

3 Months Ended

Mar. 31, 2020

Basic earnings per share (“basic EPS”) is computed by dividing net income by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share (“diluted EPS”) gives effect to all dilutive potential shares outstanding resulting from employee stock options, restricted stock units, performance share units and stock appreciation rights ("SARs") during the period.

The following table sets forth the computation of basic and diluted earnings per share for the three months ended March 31, 2020 and 2019:



	Three Months Ended March 31,
	2020		2019
Net income	$	5,927	$	1,021

Basic – weighted average shares outstanding	28,478		28,173

Effect of dilutive potential securities	1,229		861

Diluted – weighted average shares outstanding	29,707		29,034

Net income (per share)
Basic	$	0.21	$	0.04
Diluted	0.20		0.04

The shares used in the calculation of diluted EPS exclude options and SARs to purchase shares where the exercise price was greater than the average market price of common shares for the period and the effect of the inclusion would be anti-dilutive. Such shares aggregated approximately 1.1 million for the three months ended March 31, 2020 and 0.3 million for the three months ended March 31, 2019. Our 2.625% convertible notes due in 2024 (the “Notes”) are convertible under certain circumstances, as defined in the indenture, into a combination of cash and CONMED common stock. The calculation of diluted EPS would include potential diluted shares upon conversion of the Notes when the average market price per share of our common stock for the period, is greater than the conversion price of the Notes of $88.80. We intend to settle in cash the principal outstanding and use the treasury stock method when calculating their potential dilutive effect, if any. We have entered into convertible notes hedge transactions to increase the effective conversion price of the Notes to $114.92. However, our convertible notes hedges are not included when calculating potential dilutive shares since their effect is always anti-dilutive.

During the three months ended March 31, 2020, our average share price exceeded the conversion price of the Notes and we included 0.1 million shares assumed to be issued if the Notes were converted in our diluted share count. During the three months ended March 31, 2019, our average share price had not exceeded the conversion price of the Notes; therefore, under the net share settlement method, there were no potential shares issuable under the Notes to be used in the calculation of diluted EPS.