15. Earnings and Dividends Per Share

The Company’s unvested restricted share units contain rights to receive nonforfeitable dividends and thus are participating securities requiring the two-class method of computing earnings per share (“EPS”). Under the two-class method, EPS is computed by dividing the sum of distributed earnings to common shareholders and undistributed earnings allocated to common shareholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, undistributed earnings are allocated to both common shares and participating securities based on the weighted-average shares outstanding during the period. The following table provides a reconciliation of net loss from continuing operations and the number of common shares used in the computations of “basic” EPS, which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares (in thousands, except per share amounts):


	For the Year Ended December 31,
	2012			2011			2010
Basic Earnings:
Continuing Operations:
Loss from continuing operations	$	(14,776	)	$	(7,886	)	$	(162,253	)
Plus: Gain on disposition of real estate		5,863			7,079			1,318
Plus: (Loss) income attributable to non-controlling interests		(493	)		3,543			12,071

(Loss) income from continuing operations attributable to DDR		(9,406	)		2,736			(148,864	)
Write-off of preferred share original issuance costs		(5,804	)		(6,402	)		—
Preferred dividends		(28,645	)		(31,587	)		(42,269	)

Basic — Loss from continuing operations attributable to DDR common shareholders		(43,855	)		(35,253	)		(191,133	)
Less: Earnings attributable to unvested shares and operating partnership units		(1,114	)		(488	)		(155	)

Basic — Loss from continuing operations	$	(44,969	)	$	(35,741	)	$	(191,288	)
Discontinued Operations:
Loss from discontinued operations		(16,416	)		(18,590	)		(86,786	)
Plus: Income attributable to non-controlling interests		—			—			26,292

Basic — Loss from discontinued operations		(16,416	)		(18,590	)		(60,494	)

Basic — Net loss attributable to DDR common shareholders after allocation to participating securities	$	(61,385	)	$	(54,331	)	$	(251,782	)

Diluted Earnings:
Continuing Operations:
Basic — Loss from continuing operations attributable to DDR common shareholders	$	(43,855	)	$	(35,253	)	$	(191,133	)
Less: Earnings attributable to unvested shares and operating partnership units		(1,114	)		(488	)		(155	)
Less: Fair value of Otto Family warrants		—			(21,926	)		—

Diluted — Loss from continuing operations	$	(44,969	)	$	(57,667	)	$	(191,288	)
Discontinued Operations:
Basic — Loss from discontinued operations		(16,416	)		(18,590	)		(60,494	)

Diluted — Net loss attributable to DDR common shareholders after allocation to participating securities	$	(61,385	)	$	(76,257	)	$	(251,782	)

Number of Shares:
Basic — Average shares outstanding		291,726			270,278			244,712

Effect of dilutive securities — Warrants		—			1,194			—

Diluted — Average shares outstanding		291,726			271,472			244,712

Basic Earnings Per Share:
Loss from continuing operations attributable to DDR common shareholders	$	(0.15	)	$	(0.13	)	$	(0.78	)
Loss from discontinued operations attributable to DDR common shareholders		(0.06	)		(0.07	)		(0.25	)

Net loss attributable to DDR common shareholders	$	(0.21	)	$	(0.20	)	$	(1.03	)

Dilutive Earnings Per Share:
Loss from continuing operations attributable to DDR common shareholders	$	(0.15	)	$	(0.21	)	$	(0.78	)
Loss from discontinued operations attributable to DDR common shareholders		(0.06	)		(0.07	)		(0.25	)

Net loss attributable to DDR common shareholders	$	(0.21	)	$	(0.28	)	$	(1.03	)

Basic average shares outstanding do not include restricted shares totaling 2.4 million, 1.9 million and 1.9 million that were not vested at December 31, 2012, 2011, and 2010, respectively (Note 14).

The following potentially dilutive securities are considered in the calculation of EPS as described below:

Potentially Dilutive Securities

•

Options to purchase 2.6 million, 2.7 million and 3.2 million common shares were outstanding at December 31, 2012, 2011 and 2010, respectively (Note 14). These outstanding options were not considered in the computation of diluted EPS for all of the periods presented, as the options were anti-dilutive due to the Company’s loss from continuing operations.

•

The exchange into common shares associated with OP Units was not included in the computation of diluted shares outstanding for 2012, 2011 or 2010 because the effect of assuming conversion was anti-dilutive (Note 10).

•

The Company’s senior convertible notes due 2040, which are convertible into common shares of the Company with a conversion price of $15.76 at December 31, 2012, were not included in the computation of diluted EPS for all periods presented because the Company’s common share price did not exceed 125% of the conversion price (Note 7) in this period and would therefore be anti-dilutive. The Company’s senior convertible notes due 2012 and 2011, which were convertible into common shares of the Company, were not included in the computation of diluted EPS for all periods presented because the Company’s common share price did not exceed the conversion prices in these periods and would therefore have been anti-dilutive. The senior convertible notes due 2012 were repaid at maturity in March 2012, and the senior convertible notes due 2011 were repaid at maturity in August 2011. In addition, the purchased options related to these two senior convertible note issuances were not included in the computation of diluted EPS for all periods presented because the purchase options were anti-dilutive.

•

Shares subject to issuance under the Company’s VSEP (Note 14) were not considered in the computation of diluted EPS for the years ended December 2011 and 2010 because they were anti-dilutive due to the Company’s loss from continuing operations. The final measurement period was December 31, 2012 and, accordingly, not considered for the 2012 computation.

•

Warrants to purchase 10.0 million common shares issued in 2009 and exercised in March 2011 were dilutive for 2011 and were included in the calculation of diluted EPS. In 2010, these warrants were not included in the computation of diluted EPS, as the warrants were anti-dilutive (Note 10). This agreement was not in effect in 2012, as they were exercised in March 2011.

•

The 19.0 million common shares that were subject to the forward equity agreements entered into in January 2012 were not included in the computation of diluted EPS using the treasury stock method prior to the date of settlement, because they were anti-dilutive due to the Company’s loss from continuing operations. The Company settled the forward equity agreements in June 2012. This agreement was not in effect in 2011 and 2010. The forward equity agreement entered into in March 2011 for 9.5 million common shares was not included in the computation of diluted EPS using the treasury stock method for the year ended December 31, 2011, due to the Company’s loss from continuing operations. These shares were issued in April 2011. This agreement was not in effect in 2010.