Earnings Per Share

9 Months Ended

Sep. 30, 2019

16. Earnings per Share

Basic net income (loss) attributable to Archrock common stockholders per common share is computed using the two-class method, which is an earnings allocation formula that determines net income (loss) per share for each class of common stock and participating security according to dividends declared and participation rights in undistributed earnings. Under the two-class method, basic net income (loss) attributable to Archrock common stockholders per common share is determined by dividing net income (loss) attributable to Archrock common stockholders, after deducting amounts allocated to participating securities, by the weighted average number of common shares outstanding for the period. Participating securities include unvested restricted stock and stock-settled restricted stock units that have nonforfeitable rights to receive dividends or dividend equivalents, whether paid or unpaid. During periods of net loss, no effect is given to participating securities because they do not have a contractual obligation to participate in our losses.

Diluted net income (loss) attributable to Archrock common stockholders per common share is computed using the weighted average number of shares outstanding adjusted for the incremental common stock equivalents attributed to outstanding options, performance-based restricted stock units and stock to be issued pursuant to our employee stock purchase plan unless their effect would be anti-dilutive.

The following table summarizes net income attributable to Archrock common stockholders used in the calculation of basic and diluted net income per common share (in thousands):



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Net income from continuing operations attributable to Archrock stockholders	$	20,407		$	9,974		$	51,559		$	8,095
Loss from discontinued operations, net of tax	—			—			(273		)	—
Net income attributable to Archrock stockholders	20,407			9,974			51,286			8,095
Less: Net income attributable to participating securities	(302		)	(241		)	(876		)	(554		)
Net income attributable to Archrock common stockholders	$	20,105		$	9,733		$	50,410		$	7,541

The following table shows the potential shares of common stock that were included in computing diluted net income attributable to Archrock common stockholders per common share (in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Weighted average common shares outstanding including participating securities	144,692		129,486		135,081		104,489
Less: Weighted average participating securities outstanding	(1,761	)	(1,644	)	(1,911	)	(1,576	)
Weighted average common shares outstanding used in basic net income per common share	142,931		127,842		133,170		102,913
Net dilutive potential common shares issuable:
On exercise of options and vesting of performance-based restricted stock units	33		111		33		96
On settlement of employee stock purchase plan shares	1		2		3		4
Weighted average common shares outstanding used in diluted net income per common share	142,965		127,955		133,206		103,013

The following table shows the potential shares of common stock issuable that were excluded from computing diluted net income attributable to Archrock common stockholders per common share as their inclusion would have been anti-dilutive (in thousands):



	Three Months Ended September 30,		Nine Months Ended September 30,
	2019	2018	2019	2018
On exercise of options where exercise price is greater than average market value for the period	154	187	154	199