SEMPRA ENERGY - SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2019

SEMPRA ENERGY - SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

SEMPRA ENERGY – SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

SEMPRA ENERGY COMMON STOCK OFFERINGS

In January 2018, we completed the offering of 26,869,158 shares of our common stock, no par value, in a registered public offering at $107.00 per share (approximately $105.07 per share after deducting underwriting discounts), with 23,364,486 shares pursuant to forward sale agreements. We received net proceeds totaling approximately $2.8 billion to fully settle these shares, as follows:


▪	$367 million (net of underwriting discounts and equity issuance costs of $8 million) to cover overallotment shares of 3,504,672 in the first quarter of 2018 at a settlement price of $105.07 per share;


▪	$900 million (net of underwriting discounts of $16 million) from the settlement of 8,556,630 shares in the first quarter of 2018 at a forward sale price of $105.18 per share;


▪	$800 million (net of underwriting discounts of $14 million) from the settlement of 7,651,671 shares in the second quarter of 2018 at forward sale prices ranging from $104.53 to $104.58 per share; and


▪	$728 million (net of underwriting discounts of $13 million) from the settlement of 7,156,185 shares in the third quarter of 2019 at a forward sale price of $101.74 per share.

In July 2018, we completed the offering of 11,212,500 shares of our common stock, no par value, in a registered public offering at $113.75 per share (approximately $111.87 per share after deducting underwriting discounts), with 9,750,000 shares pursuant to forward sale agreements. We received net proceeds totaling approximately $1.2 billion to fully settle these shares, as follows:


▪	$164 million (net of underwriting discounts and equity issuance costs of $3 million) to cover overallotment shares of 1,462,500 in the third quarter of 2018 at a settlement price of $111.87 per share; and


▪	$1,066 million (net of underwriting discounts of $18 million) from the settlement of 9,750,000 shares in the fourth quarter of 2019 at a forward sale price of $109.33 per share.

EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.



EARNINGS (LOSSES) PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Years ended December 31,
	2019			2018			2017
Numerator for continuing operations:
Income from continuing operations, net of income tax	$	1,999		$	938		$	382
Earnings attributable to noncontrolling interests	(129		)	(44		)	(67		)
Mandatory convertible preferred stock dividends	(142		)	(125		)	—
Preferred dividends of subsidiary	(1		)	(1		)	(1		)
Earnings from continuing operations attributable to common shares	$	1,727		$	768		$	314

Numerator for discontinued operations:
Income (loss) from discontinued operations, net of income tax	$	363		$	188		$	(31	)
Earnings attributable to noncontrolling interests	(35		)	(32		)	(27		)
Earnings (losses) from discontinued operations attributable to common shares	$	328		$	156		$	(58	)

Numerator for earnings:
Earnings attributable to common shares	$	2,055		$	924		$	256

Denominator:
Weighted-average common shares outstanding for basic EPS⁽¹⁾	277,904			268,072			251,545
Dilutive effect of stock options and RSUs⁽²⁾	1,585			919			755
Dilutive effect of common shares sold forward	2,544			861			—
Weighted-average common shares outstanding for diluted EPS	282,033			269,852			252,300

Basic EPS:
Earnings from continuing operations	$	6.22		$	2.86		$	1.25
Earnings (losses) from discontinued operations	$	1.18		$	0.59		$	(0.23	)
Earnings	$	7.40		$	3.45		$	1.02

Diluted EPS:
Earnings from continuing operations	$	6.13		$	2.84		$	1.24
Earnings (losses) from discontinued operations	$	1.16		$	0.58		$	(0.23	)
Earnings	$	7.29		$	3.42		$	1.01


⁽¹⁾	Includes fully vested RSUs held in our Deferred Compensation Plan of 617 in 2019, 641 in 2018 and 609 in 2017. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.


⁽²⁾	Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS excludes potentially dilutive shares of 80,281 for 2019, 20,814 for 2018 and 237,741 for 2017 because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

The potentially dilutive impact from the forward sale of our common stock pursuant to the forward sale agreements that we discuss above is reflected in our diluted EPS calculation using the treasury stock method. As of December 31, 2019, we have fully

settled all forward sale agreements and those shares are included in weighted-average shares common shares outstanding for basic EPS.

The potentially dilutive impact from mandatory convertible preferred stock that we issued in 2018 is calculated under the if-converted method. The computation of diluted EPS for the years ended December 31, 2019 and 2018 excludes 17,471,375 and 17,197,035 potentially dilutive shares, respectively, because to include them would be antidilutive for those periods. However, these shares could potentially dilute basic EPS in the future. We discuss the 2018 issuances of our mandatory convertible preferred stock in Note 13.

We are authorized to issue 750 million shares of no par value common stock. The following table provides common stock activity for the last three years.



COMMON STOCK ACTIVITY

	Years ended December 31,
	2019		2018		2017
Common shares outstanding, January 1	273,769,513		251,358,977		250,152,514
Shares issued under forward sale agreements	16,906,185		21,175,473		—
RSUs vesting⁽¹⁾	463,012		509,042		362,022
Stock options exercised	52,540		138,861		164,454
Savings plan issuance	475,774		553,036		567,428
Common stock investment plan⁽²⁾	199,253		231,242		254,047
Issuance of RSUs held in our Deferred Compensation Plan	59,470		3,357		7,811
Shares repurchased⁽³⁾	(212,822	)	(200,475	)	(149,299	)
Common shares outstanding, December 31	291,712,925		273,769,513		251,358,977


⁽¹⁾	Includes dividend equivalents.


⁽²⁾	Participants in the Direct Stock Purchase Plan may reinvest dividends to purchase newly issued shares.

⁽³⁾

Generally, we purchase shares of our common stock or units from LTIP participants who elect to sell to us a sufficient number of vested RSUs to meet minimum statutory tax withholding requirements.