Earnings Per Share

3 Months Ended

Mar. 31, 2016

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,
	2016			2015
Net income attributable to Alcoa	$	16		$	195
Less: preferred stock dividends declared		18			17

Net (loss) income available to Alcoa common shareholders – basic		(2	)		178
Add: dividends related to mandatory convertible preferred stock		—			—
Add: interest expense related to convertible notes		—			—

Net (loss) income available to Alcoa common shareholders – diluted	$	(2	)	$	178

Average shares outstanding – basic		1,314			1,221
Effect of dilutive securities:
Stock options		—			6
Stock and performance awards		—			11
Mandatory convertible preferred stock		—			—
Convertible notes		—			—

Average shares outstanding – diluted		1,314			1,238

In the first quarter of 2016, 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 available to Alcoa common shareholders. As a result, 77 million share equivalents related to mandatory convertible preferred were not included in the computation of diluted EPS. Additionally, 24 million stock awards, 42 million stock options, and 28 million share equivalents related to convertible debt were not included in the computation of diluted EPS. Had Alcoa generated sufficient net income in the first quarter of 2016, 77 million, 28 million, 10 million, and 2 million potential shares of common stock related to mandatory convertible preferred stock, convertible notes, stock awards, and stock options, respectively, would have been included in diluted average shares outstanding.

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.

Options to purchase 26 million and 13 million shares of common stock at a weighted average exercise price of $12.74 and $14.79 per share were outstanding as of March 31, 2016 and 2015, 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.