Earnings per Share

Basic and diluted earnings per share are computed using the two-class method, which is an earnings allocation method that determines earnings per share for common shares and participating securities. The participating securities consist of the Company’s Series A Convertible Perpetual Preferred Stock. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. In periods of loss, no allocation is made to the preferred shares.

The computations of basic and diluted earnings per share are as follows:



	Years Ended December 31,
(In millions, except per share data)	2018			2017			2016
Basic earnings per common share
Net income attributable to XPO	$	422		$	340		$	69
Convertible preferred dividends	(3		)	(3		)	(3		)
Non-cash allocation of undistributed earnings	(29		)	(25		)	(3		)
Net income allocable to common shares, basic	$	390		$	312		$	63

Basic weighted-average common shares	123			115			110
Basic earnings per share	$	3.17		$	2.72		$	0.57

Diluted earnings per common share
Net income allocable to common shares, basic	$	390		$	312		$	63
Interest from Convertible Senior Notes	—			1			2
Net income allocable to common shares, diluted	$	390		$	313		$	65

Basic weighted-average common shares	123			115			110
Dilutive effect of Convertible Senior Notes	—			2			3
Dilutive effect of non-participating stock-based awards and equity forward	12			11			10
Diluted weighted-average common shares	135			128			123

Diluted earnings per share	$	2.88		$	2.45		$	0.53

Potential common shares excluded	10			10			12

Certain shares were not included in the computation of diluted earnings per share because the effect was anti-dilutive.