10. Earnings Per Share

Basic earnings per share attributable to Legg Mason, Inc. shareholders ("EPS") is calculated by dividing Net Income Attributable to Legg Mason, Inc. (adjusted by removing earnings allocated to participating securities) by the weighted-average number of shares outstanding, which excludes participating securities. Legg Mason issues to employees restricted stock and restricted stock units that are deemed to be participating securities prior to vesting, because the related unvested restricted shares/units entitle their holder to nonforfeitable dividend rights. In this circumstance, accounting guidance requires a “two-class method” for EPS calculations that excludes earnings (potentially both distributed and undistributed) allocated to participating securities and does not allocate losses to participating securities.

Diluted EPS is similar to basic EPS, but the effect of potential common shares is included in the calculation unless the potential common shares are antidilutive.

During the three months ended June 30, 2017 and 2016, Legg Mason purchased and retired 2,369 and 3,475 shares of its common stock, respectively, for $89,649 and $111,673, respectively, through open market purchases, and retired 337 and 357 shares of its common stock, respectively, for $12,811 and $11,661, respectively, under net share settlements of annual deferred compensation award vesting. Total retired shares reduced weighted-average shares outstanding by 1,329 and 2,015 shares for the three months ended June 30, 2017 and 2016, respectively.

The par value of the shares repurchased is charged to common stock, with the excess of the purchase price over par first charged against additional paid-in capital, with the remaining balance, if any, charged against retained earnings.

The following table presents the computations of basic and diluted EPS:



	Three Months Ended June 30,
	2017		2016
Basic weighted-average shares outstanding for EPS	94,869		104,465
Potential common shares:
Dilutive employee stock options	428		212
Diluted weighted-average shares outstanding for EPS	95,297		104,677

Net Income Attributable to Legg Mason, Inc.	$	50,920	$	33,452
Less: Earnings (distributed and undistributed) allocated to participating securities	1,736		1,051
Net Income (Distributed and Undistributed) Allocated to Shareholders (Excluding Participating Securities)	$	49,184	$	32,401

Net Income per share Attributable to Legg Mason, Inc. Shareholders
Basic	$	0.52	$	0.31
Diluted	$	0.52	$	0.31

The weighted-average shares for the three months ended June 30, 2017 and 2016, exclude weighted-average unvested restricted shares deemed to be participating securities of 3,192 and 3,134, respectively.

The diluted EPS calculations for the three months ended June 30, 2017 and 2016, exclude any potential common shares issuable under the 14,205 warrants issued in connection with the repurchase of Convertible Notes in May 2012 because the market price of Legg Mason common stock did not exceed the exercise price, and therefore, the warrants would be antidilutive.

Options to purchase 2,284 and 3,493 shares for the three months ended June 30, 2017 and 2016, respectively, were not included in the computation of diluted EPS because the presumed proceeds from exercising such options, including the related income tax benefits, exceed the average price of the common shares for the period and, therefore, the options are deemed antidilutive.

Further, market- and performance-based awards are excluded from potential dilution until the designated market or performance condition is met. Unvested restricted shares for the three months ended June 30, 2017 and 2016, were antidilutive and, therefore, do not further impact diluted EPS