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):



	First quarter ended
	March 31,
	2018			2017
Net income	$	143		$	322
Less: Preferred stock dividends declared	(1		)	(17		)
Net income available to Arconic common shareholders - basic	142			305
Add: Interest expense related to convertible notes	3			2
Add: Dividends related to mandatory convertible preferred stock	—			17
Net income available to Arconic common shareholders - diluted	$	145		$	324

Average shares outstanding - basic	482			440
Effect of dilutive securities:
Stock options	5			1
Stock and performance awards	2			5
Mandatory convertible preferred stock	—			39
Convertible notes	14			14
Average shares outstanding - diluted	503			499

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



	First quarter ended
	March 31,
	2018	2017
Mandatory convertible preferred stock	—	—
Convertible notes	—	—
Stock options⁽¹⁾	6	—
Stock awards	—	4


⁽¹⁾	The average exercise price of options was $30.75 per share for the first quarter of 2018.