Earnings Per Share

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



	First Quarters
	2018		2017
Numerator (Dollars in millions):
Net Earnings	$	695	$	362

Denominator (Units in millions):
Average Common Shares Outstanding	885		927
Other Potentially Dilutive Common Shares	3		2
Average Common Shares Outstanding, Assuming Dilution	888		929

Net Earnings Per Share, Basic	$	0.78	$	0.39
Net Earnings Per Share, Assuming Dilution	$	0.78	$	0.39

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 because it is offset by shares CSX could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent. Approximately 800 thousand and 3.4 million of total average outstanding stock options for the first quarters ended March 31, 2018 and March 31, 2017, respectively, were excluded from the diluted earnings per share calculation because their effect was antidilutive.

Share Repurchases and Dividend Increase

On January 19, 2018, the Company entered into an accelerated share repurchase agreement to repurchase shares of the Company’s common stock. Under this agreement, the Company made a prepayment of $150 million to a financial institution and received an initial delivery of shares valued at $120 million. The remaining balance of $30 million was settled through receipt of additional shares on February 22, 2018 with the final net number of shares calculated based on the volume-weighted average price of the Company's common stock over the term of the agreement, less a discount. Total shares repurchased under the agreement were approximately 2.7 million shares, at an average purchase price of $55.02 per share.

NOTE 2. Earnings Per Share, continued

On February 12, 2018, the Company announced an increase to the $1.5 billion share repurchase program first announced in October 2017, bringing the total authorized to $5 billion. This program is expected to be completed by the end of first quarter 2019. During the first quarters of 2018 and 2017, the Company repurchased approximately $836 million, or 15 million shares, and $258 million, or 6 million shares, respectively.

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.

On February 12, 2018, the Company also announced a 10 percent increase in the quarterly dividend from $0.20 per share of common stock to $0.22 per share of common stock, payable on March 15, 2018 to shareholders of record at the close of business on March 1, 2018.