Earnings Per Share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

J. Earnings Per Share—Basic earnings per share (EPS) amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The information used to compute basic and diluted EPS attributable to Alcoa common shareholders was as follows (shares in millions):

	First quarter ended March 31,
	2014			2013
Net (loss) income attributable to Alcoa common shareholders	$	(178	)	$	149
Less: preferred stock dividends declared		1			1
Net (loss) income available to Alcoa common shareholders – basic		(179	)		148
Add: interest expense related to convertible notes		—			8
Net (loss) income available to Alcoa common shareholders – diluted	$	(179	)	$	156
Average shares outstanding – basic		1,101			1,069
Effect of dilutive securities:
Stock options		—			3
Stock and performance awards		—			8
Convertible notes		—			89
Average shares outstanding – diluted		1,101			1,169

In the 2014 first quarter, basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive since Alcoa generated a net loss. As a result, 66 million share equivalents related to convertible notes (see below), 18 million stock awards, and 31 million stock options were not included in the computation of diluted EPS. Had Alcoa generated sufficient net income in the first quarter of 2014, 66 million, 10 million, and 5 million potential shares of common stock related to the convertible notes, stock awards, and stock options, respectively, would have been included in diluted average shares outstanding.

In the first quarter of 2014, holders of the convertible notes exercised their option to convert the notes into 89 million shares of Alcoa common stock (see Note F). As a result, these 89 million shares were outstanding for a portion of the 2014 first quarter equivalent to a weighted average of 23 million shares. The 23 million shares were included in both basic and diluted average shares outstanding for the first quarter of 2014. For the portion of the 2014 first quarter that the notes were still outstanding debt, a weighted average of the 89 million share equivalents (66 million) would have been included only in the diluted average shares outstanding if their effect was dilutive.

Options to purchase 10 million and 31 million shares of common stock at a weighted average exercise price of $14.53 and $12.20 per share were outstanding as of March 31, 2014 and 2013, respectively, but were not included in the computation of diluted EPS because they were anti-dilutive, as the exercise prices of the options were greater than the average market price of Alcoa’s common stock.