13. Earnings per share

Basic earnings per share include shares of restricted stock that meet the definition of a participating security because these shares are eligible to receive non-forfeitable dividend equivalents at the same rate as common stock. Basic earnings per share have been calculated using the two-class method and basic earnings per share for the three and nine months ended March 31, 2014 and 2013, reflects only undistributed earnings. The computation below of basic earnings per share excludes the net income attributable to shares of unvested restricted stock (participating non-vested restricted stock) from the numerator and excludes the dilutive impact of these unvested shares of restricted stock from the denominator.

Diluted earnings per share has been calculated to give effect to the number of shares of additional common stock that would have been outstanding if the potential dilutive instruments had been issued in each period. Stock options are included in the calculation of diluted earnings per share utilizing the treasury stock method and are not considered to be participating securities as the stock options do not contain non-forfeitable dividend rights. The calculation of diluted earnings per share includes the dilutive effect of a portion of the restricted stock granted to employees in February 2012 and August 2013 as these shares of restricted stock are considered contingently returnable shares for the purposes of the diluted earnings per share calculation and the vesting conditions in respect of a portion of the restricted stock had been satisfied. The vesting conditions are discussed in Note 17 to the Company's audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended June 30, 2013.

The following table presents net income attributable to Net1 (income from continuing operations) and the share data used in the basic and diluted earnings per share computations using the two-class method:


		Three months ended						Nine months ended
		March 31,						March 31,
		2014			2013			2014			2013
	(in thousands except percent and per share data)						(in thousands except percent and per share data)
Numerator:
Net income (loss) attributable to Net1	$	17,182		$	(4,681	)	$	41,527		$	4,692
Undistributed earnings (loss)		17,182			(4,681	)		41,527			4,692
Percent allocated to common shareholders
(Calculation 1)		99	%		99	%		99	%		99	%
Numerator for earnings (loss) per share:
basic and diluted	$	16,944		$	(4,634	)	$	40,917		$	4,637

Denominator:
Denominator for basic earnings per share:
weighted-average common shares
outstanding		45,142			45,098			45,070			45,018
Effect of dilutive securities:
Performance shares related to
acquisition		-			16			-			5
Stock options		91			26			106			37
Denominator for diluted earnings per
share: adjusted weighted average
common shares outstanding and
assumed conversion		45,233			45,140			45,176			45,060

Earnings (loss) per share:
Basic	$	0.38		$	(0.10	)	$	0.91		$	0.10
Diluted	$	0.37		$	(0.10	)	$	0.90		$	0.10

(Calculation 1)
Basic weighted-average common shares
outstanding (A)		45,142			45,098			45,070			45,018
Basic weighted-average common shares
outstanding and unvested restricted shares
expected to vest (B)		45,776			45,557			45,742			45,552
Percent allocated to common shareholders
(A) / (B)		99	%		99	%		99	%		99	%

Options to purchase 2,040,339 shares of the Company's common stock at prices ranging from $7.35 to $24.46 per share were outstanding during the three and nine months ended March 31, 2014, but were not included in the computation of diluted earnings per share because the options' exercise price were greater than the average market price of the Company's common shares. The options, which expire at various dates through August 21, 2023, were still outstanding as of March 31, 2014.