Earnings Per Share

6 Months Ended

Jun. 30, 2016

L. 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):


	Second quarter ended June 30,				Six months ended June 30,
	2016		2015		2016		2015
Net income attributable to Alcoa	$	135	$	140	$	151	$	335
Less: preferred stock dividends declared		17		17		35		35

Net income available to Alcoa common shareholders – basic		118		123		116		300
Add: interest expense related to convertible notes		2		—		—		—
Add: dividends related to mandatory convertible preferred stock		—		—		—		—

Net income available to Alcoa common shareholders – diluted	$	120	$	123	$	116	$	300

Average shares outstanding – basic		1,315		1,222		1,314		1,222
Effect of dilutive securities:
Stock options		2		4		1		5
Stock and performance awards		11		11		11		11
Convertible notes		28		—		—		—
Mandatory convertible preferred stock		—		—		—		—

Average shares outstanding – diluted		1,356		1,237		1,326		1,238

In all periods presented, 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. Additionally, in the 2016 six-month period, 28 million share equivalents related to convertible notes were not included in the computation of diluted EPS because their effect was anti-dilutive

Options to purchase 25 million and 13 million shares of common stock at a weighted average exercise price of $12.73 and $14.78 per share were outstanding as of June 30, 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.