Earnings Per Share

9 Months Ended

Sep. 30, 2019

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,
	2019			2018			2019			2018
Net income	$	95		$	161		$	161		$	424
Less: preferred stock dividends declared	(1		)	(1		)	(2		)	(2		)
Net income available to Arconic common shareholders - basic	94			160			159			422
Add: Interest expense related to convertible notes	3			3			—			8
Net income available to Arconic common shareholders - diluted	$	97		$	163		$	159		$	430

Average shares outstanding - basic	436			483			451			483
Effect of dilutive securities:
Stock options	1			—			1			1
Stock and performance awards	5			5			3			5
Convertible notes⁽¹⁾	15			14			—			14
Average shares outstanding - diluted	457			502			455			503

⁽¹⁾

The convertible notes matured on October 15, 2019 (see Note O). 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 will cease 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 September 30, 2019 and 2018 was 434 and 483, respectively. The decrease in common stock outstanding at September 30, 2019 was primarily due to the impact of share repurchases of approximately 52 in the nine months ended September 30, 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 the third quarter and nine months ended September 30, 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).



	Third quarter ended		Nine months ended
	September 30,		September 30,
	2019	2018	2019	2018
Convertible notes	—	—	15	—
Stock options⁽¹⁾	3	6	3	6

⁽¹⁾

The average exercise price per share of options was $32.64 for the third quarter and nine months ended September 30, 2019 and $29.14 for the third quarter and nine months ended September 30, 2018.