J. 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 number of shares and per share amounts for all periods presented below have been updated to reflect the Reverse Stock Split (see Note A).

The information used to compute basic and diluted EPS attributable to Arconic common shareholders was as follows (shares in millions):


	Third quarter ended September 30,						Nine months ended September 30,
	2017			2016			2017			2016
Income from continuing operations after income taxes	$	119		$	66		$	653		$	229
Less: Preferred stock dividends declared		(18	)		(18	)		(53	)		(52	)

Income from continuing operations available to Arconic common shareholders		101			48			600			177
Income from discontinued operations after income taxes and noncontrolling interests		—			100			—			88

Net income available to Arconic common shareholders - basic		101			148			600			265
Add: Interest expense related to convertible notes		2			2			7			—
Add: Dividends related to mandatory convertible preferred stock		—			—			50			—

Net income available to Arconic common shareholders - diluted	$	103		$	150		$	657		$	265

Weighted average shares outstanding - basic		442			438			441			438
Effect of dilutive securities:
Stock options		1			1			2			1
Stock and performance awards		5			5			5			4
Mandatory convertible preferred stock		—			—			39			—
Convertible notes		14			9			14			—

Weighted average shares outstanding - diluted		462			453			501			443

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


	Third quarter ended September 30,				Nine months ended September 30,
	2017		2016		2017		2016
Mandatory convertible preferred stock		39		26		—		26
Convertible notes		—		—		—		9

Also, options to purchase 3 million shares of common stock at a weighted average exercise price of $33.33 and options to purchase 8 million shares of common stock at a weighted average exercise price of $38.16 were outstanding as of September 30, 2017 and 2016, respectively, but were not included in the computation of diluted EPS because their effect was anti-dilutive as the exercise price of the options was greater than the average market price of Arconic’s common stock.