Note 8 Earnings (Losses) Per Share

ASC 260, Earnings per Share, requires companies to treat unvested share-based payment awards that have nonforfeitable rights to dividends or dividend equivalents as a separate class of securities in calculating earnings (losses) per share. We have granted and expect to continue to grant to employees restricted stock grants that contain nonforfeitable rights to dividends. Such grants are considered participating securities under ASC 260. As such, we are required to include these grants in the calculation of our basic earnings (losses) per share and calculate basic earnings (losses) per share using the two-class method. The two-class method of computing earnings per share is an earnings allocation formula that determines earnings per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings.

Basic earnings (losses) per share is computed utilizing the two-class method and is calculated based on the weighted-average number of common shares outstanding during the periods presented.

Diluted earnings (losses) per share is computed using the weighted-average number of common and common equivalent shares outstanding during the periods utilizing the two-class method for stock options and unvested restricted stock.

A reconciliation of the numerators and denominators of the basic and diluted earnings (losses) per share computations is as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
	(In thousands, except per share amounts)
BASIC EPS:
Net income (loss) (numerator):
Income (loss) from continuing operations, net of tax	$	(97,839)	$	(250,879)	$	(681,048)	$	(168,407)
Less: net (income) loss attributable to noncontrolling interest		(1,185)		320		990		453
Less: (earnings) losses allocated to unvested shareholders		2,698		5,834		14,683		4,523
Numerator for basic earnings per share:
Adjusted income (loss) from continuing operations, net of tax - basic	$	(96,326)	$	(244,725)	$	(665,375)	$	(163,431)
Income (loss) from discontinued operations, net of tax	$	(12,187)	$	(45,275)	$	(14,097)	$	(41,067)
Weighted-average number of shares outstanding - basic		276,707		284,112		276,369		285,186
Earnings (losses) per share:
Basic from continuing operations	$	(0.35)	$	(0.86)	$	(2.41)	$	(0.57)
Basic from discontinued operations		(0.04)		(0.16)		(0.05)		(0.15)
Total Basic	$	(0.39)	$	(1.02)	$	(2.46)	$	(0.72)
DILUTED EPS:
Adjusted income (loss) from continuing operations, net of tax - basic	$	(96,326)	$	(244,725)	$	(665,375)	$	(163,431)
Add: effect of reallocating undistributed earnings of unvested shareholders		—		—		—		—
Adjusted income (loss) from continuing operations, net of tax - diluted	$	(96,326)	$	(244,725)	$	(665,375)	$	(163,431)
Income (loss) from discontinued operations, net of tax	$	(12,187)	$	(45,275)	$	(14,097)	$	(41,067)
Weighted-average number of shares outstanding - basic		276,707		284,112		276,369		285,186
Add: dilutive effect of potential common shares		—		—		—		—
Weighted-average number of shares outstanding - diluted		276,707		284,112		276,369		285,186
Earnings (losses) per share:
Diluted from continuing operations	$	(0.35)	$	(0.86)	$	(2.41)	$	(0.57)
Diluted from discontinued operations		(0.04)		(0.16)		(0.05)		(0.15)
Total Diluted	$	(0.39)	$	(1.02)	$	(2.46)	$	(0.72)

For all periods presented, the computation of diluted earnings (losses) per share excludes outstanding stock options with exercise prices greater than the average market price of Nabors’ common shares, because their inclusion would be anti-dilutive and because they are not considered participating securities. For periods in which we experience a net loss from continuing operations, all potential common shares have been excluded from the calculation of weighted-average shares outstanding, because their inclusion would be anti-dilutive. The average number of options that were excluded from diluted earnings (losses) per share that would potentially dilute earnings per share in the future were as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015

Potentially dilutive securities excluded as anti-dilutive		5,368,596		9,416,647		5,387,577		9,910,476

In any period during which the average market price of Nabors’ common shares exceeds the exercise prices of these stock options, such stock options will be included in our diluted earnings (losses) per share computation using the if-converted method of accounting. Restricted stock is included in our basic and diluted earnings (losses) per share computation using the two-class method of accounting in all periods because such stock is considered participating securities.