Earnings Per Share

Basic earnings per share (EPS) amounts are computed by dividing earnings, after the deduction of preferred stock dividends declared, by the average number of common shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents outstanding.

The information used to compute basic and diluted EPS attributable to Arconic common shareholders was as follows (shares in millions):



	Third quarter ended						Nine months ended
	September 30,						September 30,
	2018			2017			2018			2017
Net income	$	161		$	119		$	424		$	653
Less: Preferred stock dividends declared	(1		)	(18		)	(2		)	(53		)
Net income available to Arconic common shareholders - basic	160			101			422			600
Add: Interest expense related to convertible notes	3			2			8			7
Add: Dividends related to mandatory convertible preferred stock	—			—			—			50
Net income available to Arconic common shareholders - diluted	$	163		$	103		$	430		$	657

Average shares outstanding - basic	483			442			483			441
Effect of dilutive securities:
Stock options	—			1			1			2
Stock and performance awards	5			5			5			5
Mandatory convertible preferred stock	—			—			—			39
Convertible notes	14			14			14			14
Average shares outstanding - diluted	502			462			503			501

The following shares were excluded from the calculation of average shares outstanding – diluted as their effect was anti-dilutive (shares in millions).



	Third quarter ended		Nine months ended
	September 30,		September 30,
	2018	2017	2018	2017
Mandatory convertible preferred stock	—	39	—	—
Stock options⁽¹⁾	6	3	6	3


⁽¹⁾	The average exercise price of options per share was $29.14 for the third quarter and nine months ended September 30, 2018 and $33.33 for the third quarter and nine months ended September 30, 2017.