Earnings Per Share

12 Months Ended

Dec. 31, 2019

Basic earnings per share (EPS) amounts are computed by dividing earnings (loss), 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):



For the year ended December 31,	2019			2018			2017
Net income (loss)	$	470		$	642		$	(74	)
Less: preferred stock dividends declared	(2		)	(2		)	(53		)
Net income (loss) available to Arconic common shareholders - basic	468			640			(127		)
Add: interest expense related to convertible notes	9			11			—
Net income (loss) available to Arconic common shareholders - diluted	$	477		$	651		$	(127	)
Average shares outstanding - basic	446			483			451
Effect of dilutive securities:
Stock options	1			1			—
Stock and performance awards	5			5			—
Convertible notes⁽¹⁾	11			14			—
Average shares outstanding - diluted	463			503			451

⁽¹⁾

The convertible notes matured on October 15, 2019 (see Note P). No shares of the Company’s common stock were issued in connection with the maturity or the final conversion of the convertible notes. As of October 15, 2019, the calculation of average diluted shares outstanding ceased to include the approximately 15 million shares of common stock and the corresponding interest expense previously attributable to the convertible notes.

Common stock outstanding at December 31, 2019 and 2018 was 433 million and 483 million, respectively. The decrease in common stock outstanding at December 31, 2019 was primarily due to the impact of share repurchases of approximately 55 million in 2019 (see Note H). As average shares outstanding are used in the calculation for both basic and diluted EPS, the full impact of share repurchases was not realized in EPS in 2019 as the share repurchases occurred at varying points during 2019.

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



	2019	2018	2017
Mandatory convertible preferred stock	n/a	n/a	39
Convertible notes	—	—	14
Stock options⁽¹⁾	1	9	11
Stock awards	—	—	7


⁽¹⁾	The average exercise price of options per share was $35.75, $26.79, and $33.32 for 2019, 2018, and 2017, respectively.

In 2017, had Arconic generated sufficient net income, 30 million, 14 million, 5 million, and 1 million potential shares of common stock related to the mandatory convertible preferred stock, convertible notes, stock awards, and stock options, respectively, would have been included in diluted average shares outstanding. The mandatory convertible preferred stock converted on October 2, 2017 (see Note H).