Earnings Per Share

12 Months Ended

Dec. 31, 2019

The following is a reconciliation of the shares used in calculating basic and diluted earnings per share.



	Year Ended December 31,
	2019		2018		2017
Net income attributable to Xylem (in millions)	$	401	$	549	$	331
Shares (in thousands):
Weighted average common shares outstanding	179,958		179,750		179,602
Add: Participating securities (a)	29		27		27
Weighted average common shares outstanding — Basic	179,987		179,777		179,629
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options	803		876		712
Dilutive effect of restricted stock units and performance share units	406		479		516
Weighted average common shares outstanding — Diluted	181,196		181,132		180,857
Basic earnings per share	$	2.23	$	3.05	$	1.84
Diluted earnings per share	$	2.21	$	3.03	$	1.83


(a)	Restricted stock awards containing rights to non-forfeitable dividends that participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.

(b)

Incremental shares from stock options, restricted stock units and performance share units are computed by the treasury stock method. The weighted average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock units and performance share units, reduced by the repurchase of shares with the proceeds from the assumed exercises and unrecognized compensation expense for outstanding awards. Performance share units are included in the treasury stock calculation of diluted earnings per share based upon achievement of underlying performance and market conditions at the end of the reporting period, as applicable. See Note 17, "Stock-Based Compensation Plans" for further detail on the performance share units.



	Year Ended December 31,
(in thousands)	2019	2018	2017
Stock options	1,383	1,300	1,626
Restricted stock units	348	333	379
Performance share units	394	465	504