(7) Earnings Per Share Data (“EPS”) and Stock Based Compensation

Basic earnings per share are based on the weighted average number of common shares outstanding during the period. Diluted earnings per share are based on the weighted average number of common shares outstanding during the period adjusted to give effect to common stock equivalents.

The following table sets forth the computation of basic and diluted earnings per share for classes A, B, C and D common stockholders for the periods indicated (in thousands, except per share data):

	Three months ended June 30,						Six months ended June 30,
	2018			2017			2018			2017
Basic and Diluted:
Net income attributable to UHS	$	226,052		$	185,394		$	449,884		$	391,449
Less: Net income attributable to unvested restricted share grants		(392	)		(82	)		(496	)		(176	)
Net income attributable to UHS – basic and diluted	$	225,660		$	185,312		$	449,388		$	391,273

Weighted average number of common shares - basic		93,842			96,247			94,034			96,416
Net effect of dilutive stock options and grants based on the treasury stock method		439			795			448			791
Weighted average number of common shares and equivalents - diluted		94,281			97,042			94,482			97,207
Earnings per basic share attributable to UHS:	$	2.40		$	1.93		$	4.78		$	4.06
Earnings per diluted share attributable to UHS:	$	2.39		$	1.91		$	4.76		$	4.03

The “Net effect of dilutive stock options and grants based on the treasury stock method”, for all periods presented above, excludes certain outstanding stock options applicable to each period since the effect would have been anti-dilutive. The excluded weighted-average stock options totaled 7.6 million for the three months ended June 30, 2018 and 5.3 million for the six months ended June 30, 2018. The excluded weighted-average stock options totaled 3.0 million for the three months ended June 30, 2017 and 4.4 million for the six months ended June 30, 2017. All classes of our common stock have the same dividend rights.

Stock-Based Compensation:

During the three-month periods ended June 30, 2018 and 2017, pre-tax compensation cost of $13.6 million and $13.0 million, respectively, was recognized related to outstanding stock options. During the six-month periods ended June 30, 2018 and 2017, compensation costs of $32.5 million and $27.9 million, respectively, was recognized related to outstanding stock options. In addition, during the three-month periods ended June 30, 2018 and 2017, pre-tax compensation cost of approximately $1.2 million and $448,000 (net of cancellations), respectively, was recognized related to restricted stock. During the six-month periods ended June 30, 2018 and 2017, compensation costs of approximately $1.7 million and $599,000 (net of cancellations), respectively, was recognized related to restricted stock. As of June 30, 2018 there was approximately $141.0 million of unrecognized compensation cost related to unvested options and restricted stock which is expected to be recognized over the remaining weighted average vesting period of 2.9 years. There were 2,479,278 stock options granted (net of cancellations) during the first six months of 2018 with a weighted-average grant date fair value of $28.17 per share. There were 136,446 shares of restricted shares granted (net of cancellations) during the first six months of 2018 with a weighted-average grant date fair value of $119.44 per share.

The expense associated with stock-based compensation arrangements is a non-cash charge. In the Condensed Consolidated Statements of Cash Flows, stock-based compensation expense is an adjustment to reconcile net income to cash provided by operating activities and aggregated to $34.7 million and $29.1 million during the six-month periods ended June 30, 2018 and 2017, respectively.