Earnings Per Share

9 Months Ended

Sep. 30, 2020

We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net loss attributable to Valaris used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and includes the effect of all potentially dilutive stock options and excludes non-vested shares. In the three and nine months ended September 30, 2020 and 2019, our potentially dilutive instruments were not included in the computation of diluted EPS as the effect of including these shares in the calculation would have been anti-dilutive.

The following table is a reconciliation of income (loss) from continuing operations attributable to Valaris shares used in our basic and diluted EPS computations for the three and nine months ended September 30, 2020 and 2019 (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Income (loss) from continuing operations attributable to Valaris	$	(670.9)	$	(197.1)	$	(4,784.6)	$	18.0
Income from continuing operations allocated to non-vested share awards(1)	—		—		—		(.6)
Income (loss) from continuing operations attributable to Valaris shares	$	(670.9)	$	(197.1)	$	(4,784.6)	$	17.4

(1) Losses are not allocated to non-vested share awards. Due to the net loss position, potentially dilutive share awards are excluded from the computation of diluted EPS.

Anti-dilutive share awards totaling 400,000 were excluded from the computation of diluted EPS for the three and nine months ended September 30, 2020, respectively. Anti-dilutive share awards totaling 400,000 and 300,000 were excluded from the computation of diluted EPS for the three and nine months ended September 30, 2019, respectively.

Under the terms of our debt agreement, we have the option to settle our 2024 Convertible Notes in cash, shares or a combination thereof for the aggregate amount due upon conversion. However, the Commencement of the Chapter 11 Cases on August 19, 2020, constituted an event of default under the 2024 Convertible Notes. Any efforts to enforce payment obligations under the 2024 Convertible Notes, including any rights to require the repurchase by the Company of the 2024 Convertible Notes upon the NYSE delisting of the Class A ordinary shares, are automatically stayed as a result of the filing of the Chapter 11 Cases. During each respective reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. Our average share price did not exceed the exchange price during the three and nine months ended September 30, 2020 and 2019.

Pursuant to the terms contemplated in the RSA, upon emergence from bankruptcy, our existing Class A ordinary shares will be cancelled. Depending on certain implementation mechanisms in the restructuring related to our Class A ordinary shares and satisfaction of the applicable support requirements set forth in the RSA, the existing Class A ordinary shares may be exchanged for up to 0.01% of the New Equity and 7-year warrants to purchase up to 7% of the New Equity (subject to dilution on account of the management incentive plan contemplated by the RSA). The strike price of such warrants, if granted, will be set at a price per share equal to the value at which the Senior Noteholders would receive a 100% recovery on their claims, including accrued interest up to the Petition Date. See “Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional information related to our RSA.”