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):


	Second quarter ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
Income from continuing operations after income taxes	$	212		$	53		$	534		$	163
Less: Preferred stock dividends declared		(18	)		(17	)		(35	)		(35	)

Income from continuing operations available to Arconic common shareholders		194			36			499			128
Income (loss) from discontinued operations after income taxes and noncontrolling interests		—			82			—			(12	)

Net income available to Arconic common shareholders - basic		194			118			499			116
Add: Interest expense related to convertible notes		2			2			4			—
Add: Dividends related to mandatory convertible preferred stock		—			—			34			—

Net income available to Arconic common shareholders - diluted	$	196		$	120		$	537		$	116

Average shares outstanding - basic		441			438			440			438
Effect of dilutive securities:
Stock options		2			1			2			—
Stock and performance awards		5			4			5			4
Mandatory convertible preferred stock		—			—			39			—
Convertible notes		14			9			14			—

Average shares outstanding - diluted		462			452			500			442

The following shares were excluded from the calculation of Average shares outstanding – diluted as their effect was anti-dilutive.


	Second quarter ended June 30,				Six months ended June 30,
	2017		2016		2017		2016
Mandatory convertible preferred stock		39		26		—		26
Convertible notes		—		—		—		9

Additionally, options to purchase 7 million shares of common stock at a weighted average exercise price of $28.85 and options to purchase 8 million shares of common stock at a weighted average exercise price of $38.18 were outstanding as of June 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.