NOTE 9—EARNINGS (LOSS) PER SHARE

The Company computes earnings (loss) per share using the two-class method, as unvested restricted common stock, unvested performance shares, and unvested restricted stock units contain non-forfeitable rights to dividends and meet the criteria of participating securities. Under the two-class method, earnings are allocated between common stock and participating securities. The presentation of basic and diluted earnings per share is required only for each class of common stock and not for participating securities. As such, the Company presents basic and diluted earnings per share for its one class of common stock.

The two-class method includes an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared and undistributed earnings for the period. The Company’s reported net earnings are reduced by the amount allocated to participating securities to arrive at the earnings allocated to common stockholders for purposes of calculating earnings per share.

Basic earnings (loss) per share is computed by dividing net earnings (loss) attributable to Real Industry, Inc., less dividends and accretion on the fair value adjustment to Redeemable Preferred Stock, by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For the calculation of diluted earnings per share, the basic weighted average number of common shares outstanding is increased by the dilutive effect of unvested restricted common stock, common stock options, unvested performance shares, unvested restricted stock units, and the Warrants (as defined below in Note 10—Derivatives and Other Financial Instruments and Fair Value Measurements), determined using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2016 and 2015:

(In millions, except share	Three Months Ended September 30,						Nine Months Ended September 30,
and per share amounts)	2016			2015			2016			2015
Earnings (loss) from continuing operations	$	(10.8	)	$	2.0		$	(22.1	)	$	(29.5	)
Earnings (loss) from discontinued operations, net of income taxes		—			(0.7	)		0.1			26.5
Net earnings (loss)		(10.8	)		1.3			(22.0	)		(3.0	)
Earnings from continuing operations attributable to noncontrolling interest		0.1			0.1			0.5			0.3
Net earnings (loss) attributable to Real Industry, Inc.		(10.9	)		1.2			(22.5	)		(3.3	)
Dividends on Redeemable Preferred Stock, in-kind		(0.5	)		(0.5	)		(1.4	)		(1.0	)
Accretion of fair value adjustment to Redeemable Preferred Stock		(0.2	)		(0.2	)		(0.8	)		(0.6	)
Numerator for basic and diluted earnings (loss) per share—Net earnings (loss) available to common stockholders	$	(11.6	)	$	0.5		$	(24.7	)	$	(4.9	)
Denominator for basic earnings (loss) per share—Weighted average shares outstanding		29,268,515			28,556,383			29,196,598			25,993,660
Effect of dilutive securities		—			1,257,090			—			—
Denominator for diluted earnings (loss) per share—Weighted average shares outstanding		29,268,515			29,813,473			29,196,598			25,993,660
Basic earnings (loss) per share:
Continuing operations	$	(0.40	)	$	0.04		$	(0.85	)	$	(1.21	)
Discontinued operations		—			(0.02	)		—			1.02
Basic earnings (loss) per share	$	(0.40	)	$	0.02		$	(0.85	)	$	(0.19	)
Diluted earnings (loss) per share:
Continuing operations	$	(0.40	)	$	0.04		$	(0.85	)	$	(1.21	)
Discontinued operations		—			(0.02	)		—			1.02
Diluted earnings (loss) per share	$	(0.40	)	$	0.02		$	(0.85	)	$	(0.19	)

Unvested restricted common stock, common stock options, unvested performance shares, unvested restricted stock units, and the Warrants are antidilutive and excluded from the computation of diluted earnings per share if the assumed proceeds upon exercise or vesting are greater than the cost to reacquire the same number of shares at the average market price during the period. For the three and nine months ended September 30, 2016, and the nine months ended September 30, 2015, the impact of all outstanding unvested shares of restricted common stock, common stock options, unvested performance shares, unvested restricted stock units, and the Warrants are excluded from diluted loss per share as their impact would be antidilutive. For the three months ended September 30, 2015, there were no antidilutive securities.

The following tables provide details on the average market price of Real Industry common stock; the outstanding shares of unvested restricted common stock, common stock options, unvested performance shares, unvested restricted stock units, and Warrants that were potentially dilutive; and summary information about the potentially dilutive common stock equivalents for each of the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Average market price of Real Industry common stock	$	7.27	$	10.63	$	7.43	$	9.18

Potentially dilutive common stock equivalents:
Unvested restricted common stock		571,676		—		571,676		264,630
Outstanding common stock options		748,150		—		748,150		775,650
Unvested performance shares		354,058		—		354,058		260,000
Warrants		1,448,333		—		1,448,333		1,468,333
Total potentially dilutive common stock equivalents		3,122,217		—		3,122,217		2,768,613

	Three Months Ended September 30,				Nine Months Ended September 30,
(In millions, except exercise prices)	2016		2015		2016		2015
Average unamortized share-based compensation expense:
Restricted common stock awards	$	2.5	$	1.4	$	2.6	$	1.3
Performance share awards	$	1.3	$	1.8	$	1.8	$	0.8
Range of exercise prices on common stock options	$3.00 - $10.00		$3.00 - $10.00		$3.00 - $10.00		$3.00 - $10.00
Weighted average exercise price of the Warrants	$	5.64	$	5.64	$	5.64	$	5.75