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,
	2015		2014
Net income (loss) attributable to Alcoa common shareholders	$	195	$	(178	)
Less: preferred stock dividends declared		17		1

Net income (loss) available to Alcoa common shareholders – basic		178		(179	)
Add: dividends related to mandatory convertible preferred stock		—		—
Add: interest expense related to convertible notes		—		—

Net income (loss) available to Alcoa common shareholders – diluted	$	178	$	(179	)

Average shares outstanding – basic		1,221		1,101
Effect of dilutive securities:
Stock options		6		—
Stock and performance awards		11		—
Mandatory convertible preferred stock		—		—
Convertible notes		—		—

Average shares outstanding – diluted		1,238		1,101

In the first quarter of 2015, 77 million share equivalents related to mandatory convertible preferred stock were not included in the computation of diluted EPS because their effect was anti-dilutive.

In the first quarter of 2014, 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 2014 first quarter, 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 convertible notes exercised their option to convert the notes into 89 million shares of Alcoa common stock. 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 13 million and 10 million shares of common stock at a weighted average exercise price of $14.79 and $14.53 per share were outstanding as of March 31, 2015 and 2014, 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.

In March 2015, Alcoa entered into an agreement to acquire RTI (see Note E). The purchase price will be paid in Alcoa common stock equivalent to approximately 90 million shares as of March 31, 2015.