Earnings Per Share

3 Months Ended

Mar. 31, 2017

The following table sets forth the computation of basic earnings per share and earnings per share, assuming dilution:



	First Quarters
	2017		2016
Numerator (Dollars in millions):
Net Earnings	$	362	$	356

Denominator (Units in millions):
Average Common Shares Outstanding	927		962
Other Potentially Dilutive Common Shares	2		1
Average Common Shares Outstanding, Assuming Dilution	929		963

Net Earnings Per Share, Basic	$	0.39	$	0.37
Net Earnings Per Share, Assuming Dilution	$	0.39	$	0.37

Basic earnings per share is based on the weighted-average number of shares of common stock outstanding. Earnings per share, assuming dilution, is based on the weighted-average number of shares of common stock equivalents outstanding adjusted for the effects of common stock that may be issued as a result of potentially dilutive instruments. CSX's potentially dilutive instruments are made up of equity awards, which include long-term incentive awards, and employee stock options.

The Earnings Per Share Topic in the FASB's ASC requires CSX to include additional shares in the computation of earnings per share, assuming dilution. The additional shares included in diluted earnings per share represent the number of shares that would be issued if all of the above potentially dilutive instruments were converted into CSX common stock.

When calculating diluted earnings per share, this rule requires CSX to include the potential shares that would be outstanding if all outstanding stock options were exercised. This number is different from outstanding stock options, which is included in Note 3, Share-Based Compensation, because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately three million and four million of total average outstanding stock options for the first quarters ended March 31, 2017 and March 25, 2016, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive.

Dividend Increase and Share Repurchases

On April 20, 2017, the Company announced an 11 percent increase in the quarterly dividend to $0.20 per common share, payable on June 15, 2017 to shareholders of record at the close of business on May 31, 2017. Also, on April 20, 2017, the Company announced a new $1 billion share repurchase program, which is expected to be completed over the next 12 months.

During the first quarters of 2017 and 2016, the Company repurchased approximately $258 million, or six million shares, and $249 million, or ten million shares, respectively under the $2 billion share repurchase program announced in April 2015. As of April 5, 2017, the Company had completed all share repurchases under this program.

NOTE 2. Earnings Per Share, continued

Management's assessment of market conditions and other factors guides the timing and volume of repurchases. Future share repurchases are expected to be funded by cash on hand, cash generated from operations and debt issuances. Shares are retired immediately upon repurchase. In accordance with the Equity Topic in the ASC, the excess of repurchase price over par value is recorded in retained earnings. Generally, retained earnings is only impacted by net earnings and dividends.