The following is a reconciliation of the shares used in calculating basic and diluted net earnings per share.
Three Months Ended
Six Months Ended
June 30,
June 30,
2017
2016
2017
2016
Net income attributable to Xylem (in millions)
$
99
$
71
$
155
$
137
Shares (in thousands):
Weighted average common shares outstanding
179,571
179,020
179,557
178,790
Add: Participating securities (a)
28
46
31
38
Weighted average common shares outstanding — Basic
179,599
179,066
179,588
178,828
Plus incremental shares from assumed conversions: (b)
Dilutive effect of stock options
640
459
600
396
Dilutive effect of restricted stock units and performance share units
362
365
438
377
Weighted average common shares outstanding — Diluted
180,601
179,890
180,626
179,601
Basic earnings per share
$
0.55
$
0.39
$
0.87
$
0.77
Diluted earnings per share
$
0.55
$
0.39
$
0.86
$
0.76
(a)
Restricted stock unit awards containing rights to non-forfeitable dividends that participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.
(b)
Incremental shares from stock options, restricted stock units and performance share units are computed by the treasury stock method. The weighted average shares listed below were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive for the periods presented or were otherwise excluded under the treasury stock method. The treasury stock method calculates dilution assuming the exercise of all in-the-money options and vesting of restricted stock units and performance share units, reduced by the repurchase of shares with the proceeds from the assumed exercises and unrecognized compensation expense for outstanding awards. Performance share units will be included in the treasury stock calculation of diluted earnings per share upon achievement of underlying performance or market conditions at the end of the reporting period. See Note 14, "Share-Based Compensation Plans" to the condensed consolidated financial statements for further detail on the performance share units.