Basic and diluted earnings per share are based on the weighted average number of shares of common stock and potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted earnings per share, includes the effects of dilutive restricted stock units, stock options and convertible securities. The effect of such potential common stock is computed using the treasury stock method or the if-converted method, as applicable.

The following tables present a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for income from continuing operations for the three and nine months ended September 30, 2012 and 2011. In the table below, income represents the numerator and weighted-average shares represent the denominator:

			Three Months Ended September 30,
			2012					2011
			Income		Shares	$ per Share		Income		Shares	$ per Share

			(in millions except per share data)
BASIC EARNINGS PER SHARE
	Income from continuing operations attributable
		to The AES Corporation common stockholders	$	(1,569)	747	$	(2.10)	$	(68)	778	$	(0.09)
EFFECT OF DILUTIVE SECURITIES
	Stock options			-	-		-		-	-		-
	Restricted stock units			-	-				-	-		-
DILUTED EARNINGS PER SHARE			$	(1,569)	747	$	(2.10)	$	(68)	778	$	(0.09)

			Nine Months Ended September 30,
			2012					2011
			Income		Shares	$ per Share		Income		Shares	$ per Share

			(in millions except per share data)
BASIC EARNINGS PER SHARE
	Income from continuing operations attributable
		to The AES Corporation common stockholders	$	(1,155)	759	$	(1.52)	$	360	783	$	0.46
EFFECT OF DILUTIVE SECURITIES
	Stock options			-	-		-		-	1		-
	Restricted stock units			-	-		-		-	3		-
DILUTED EARNINGS PER SHARE			$	(1,155)	759	$	(1.52)	$	360	787	$	0.46

The calculation of diluted earnings per share excluded 6,411,169 and 15,564,118 options outstanding at September 30, 2012 and 2011, respectively, that could potentially dilute basic earnings per share in the future. These options were not included in the computation of diluted earnings per share because the exercise price of those options exceeded the average market price during the related period. The calculation of diluted earnings per share also excluded 1,953,938 and 3,360,138 options outstanding at September 30, 2012 and 2011, respectively, that could potentially dilute earnings per share in the future. These options were not included in the computation of diluted earnings per share for the three months and nine months ended September 30, 2012 and for the three months ended September 30, 2011 because the potential shares would be anti-dilutive given the loss from continuing operations in each period. Had the Company generated income from continuing operations in the three and nine months ended September 30, 2012, 807,563 and 1,092,802 respectively of potential common shares of common stock related to the options would have been included in diluted average shares outstanding. Had the Company generated income from continuing operations in the three months ended September 30, 2011, 1,457,025 of potential common shares of common stock related to the options would have been included in diluted average shares outstanding.

The calculation of diluted earnings per share excluded 1,153,866 restricted stock units outstanding at September 30, 2012, that could potentially dilute basic earnings per share in the future. These restricted stock units were not included in the computation of diluted earnings per share because the average amount of compensation cost per share attributed to future service and not yet recognized exceeded the average market price during the related period and thus to include the restricted units would have been anti-dilutive. The calculation of diluted earnings per share also excluded 5,264,072 and 6,095,706 restricted stock units outstanding at September 30, 2012 and 2011, respectively, that could potentially dilute earnings per share in the future. These restricted units were not included in the computation of diluted earnings per share for the three months and nine months ended September 30, 2012 and for the three months ended September 30, 2011 because the potential shares would be anti-dilutive given the loss from continuing operations in each period. Had the Company generated income from continuing operations in the three and nine months ended September 30, 2012, 3,062,761 and 3,007,482 respectively of potential common shares of common stock related to the restricted stock units would have been included in diluted average shares outstanding. Had the Company generated income from continuing operations in the three months ended September 30, 2011, 2,882,463 of potential common shares of common stock related to the restricted stock units would have been included in diluted average shares outstanding.

For the three and nine months ended September 30, 2012 and 2011, all convertible debentures were omitted from the earnings per share calculation because they were anti-dilutive. During the three months ended September 30, 2012, 246,715 shares of common stock were issued upon the exercise of stock options. During the nine months ended September 30, 2012, 1,013,872 shares of common stock were issued under the Company's profit sharing plan and 1,290,732 shares of common stock were issued upon the exercise of stock options.