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Earnings Per Share (CenterPoint Energy)
 6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Earnings Per Share (CenterPoint Energy) [Text Block] Earnings Per Share (CenterPoint Energy)

The Series C Preferred Stock issued in May 2020 are considered participating securities since these shares participate in dividends on Common Stock on a pari passu, pro rata, as-converted basis. See Note 19 for further information on the issuance of Series C Preferred Stock. As a result, beginning June 30, 2020, earnings per share on Common Stock is computed using the two-class method required for participating securities.

The two-class method uses an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available only to common shareholders. Under the two-class method, income (loss) available to common shareholders from continuing operations is derived by subtracting the following from income (loss) from continuing operations:

•
preferred share dividend requirement;

•
deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the Series C Preferred Stock; and

•
an allocation of undistributed earnings to preferred shareholders of participating securities (Series C Preferred Stock) based on the securities’ right to receive dividends.

Undistributed earnings are calculated by subtracting dividends declared on Common Stock, the preferred share dividend requirement and deemed dividends for the amortization of the beneficial conversion feature from net income. Net losses are not allocated to the Series C Preferred Stock as it does not have a contractual obligation to share in the losses of CenterPoint Energy.

The Series C Preferred Stock includes conversion features at a price that is below the fair value of the Common Stock on the commitment date. This beneficial conversion feature, which was approximately $32 million, represents the difference between the fair value per share of the Common Stock as of the commitment date and the conversion price, multiplied by the number of common shares issuable upon conversion. The beneficial conversion feature is recognized as a discount to Series C Preferred Stock and will be amortized as a deemed dividend over the period from the issue date to the first allowable conversion date, which is November 6, 2020. The amount amortized during the three and six months ended June 30, 2020 was approximately $9 million and $9 million, respectively.

Basic earnings per common share is computed by dividing income available to common shareholders from continuing operations by the basic weighted average number of common shares outstanding during the period. Participating securities are excluded from basic weighted average number of common shares outstanding. Diluted earnings per common share is computed by dividing income available to common shareholders from continuing operations by the weighted average number of common shares outstanding, including all potentially dilutive common shares, if the effect of such common shares is dilutive.

Diluted earnings per share reflects the dilutive effect of potential common shares from share-based awards and convertible preferred shares. The dilutive effect of the restricted stock, Series B Preferred Stock and Series C Preferred Stock is computed using the if-converted method, which assumes conversion of the restricted stock, Series B Preferred Stock and Series C Preferred Stock at the beginning of the period, giving income recognition for the add-back of the preferred share dividends, amortization of beneficial conversion feature, and undistributed earnings allocated to preferred shareholders.


The following table reconciles numerators and denominators of CenterPoint Energy’s basic and diluted earnings per common share.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
 
(in millions, except per share and share amounts)
Continuing Operations Numerator:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
135

 
$
151

 
$
(918
)
 
$
294

Less: Preferred stock dividend requirement
37

 
30

 
66

 
59

Less: Amortization of beneficial conversion feature
9

 
—

 
9

 
—

Less: Undistributed earnings allocated to preferred shareholders (1)
—

 
—

 
—

 
—

Income (loss) available to common shareholders from continuing operations - basic
89

 
121

 
(993
)
 
235

Add back: Series B Preferred Stock dividend (2)
—

 
—

 
—

 
—

Add back: Series C Preferred Stock dividend (3)
—

 
—

 
—

 
—

Add back: Amortization of beneficial conversion feature
—

 
—

 
—

 
—

Income (loss) available to common shareholders from continuing operations - diluted
$
89

 
$
121

 
$
(993
)
 
$
235

Discontinued Operations Numerator:
 
 
 
 
 
 
 
Income (loss) available to common shareholders from discontinuing operations - basic and diluted
$
(30
)
 
$
44

 
$
(176
)
 
$
70

Denominator:
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
528,066,000

 
502,200,000

 
515,227,000

 
501,862,000

Plus: Incremental shares from assumed conversions:
 
 
 
 
 
 
 
Restricted stock (4)
2,771,000

 
2,631,000

 
—

 
2,631,000

Series B Preferred Stock (2)
—

 
—

 
—

 
—

Series C Preferred Stock (3)
—

 
—

 
—

 
—

Weighted average common shares outstanding - diluted
530,837,000

 
504,831,000

 
515,227,000

 
504,493,000

Earnings (loss) per common share:
 
 
 
 
 
 
 
Basic earnings (loss) per common share - continuing operations
$
0.17

 
$
0.24

 
$
(1.93
)
 
$
0.47

Basic earnings (loss) per common share - discontinued operations
(0.06
)
 
0.09

 
(0.34
)
 
0.14

Basic Earnings (Loss) Per Common Share
$
0.11

 
$
0.33

 
$
(2.27
)
 
$
0.61

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share - continuing operations
$
0.17

 
$
0.24

 
$
(1.93
)
 
$
0.47

Diluted earnings (loss) per common share - discontinued operations
(0.06
)
 
0.09

 
(0.34
)
 
0.14

Diluted Earnings (Loss) Per Common Share
$
0.11

 
$
0.33

 
$
(2.27
)
 
$
0.61



(1)
There were no undistributed earnings to be allocated to participating securities for the three and six months ended June 30, 2020.

(2)
The computation of diluted earnings per common share outstanding for the three and six months ended June 30, 2020 includes the reduction for Series B Preferred Stock dividends of $17 million and $34 million, respectively, within the numerator and excludes 35,940,000 and 35,923,000 potentially dilutive shares from the denominator, respectively, because the shares would be anti-dilutive. The computation of diluted earnings per common share outstanding for the three and six months ended June 30, 2019 includes the reduction for Series B Preferred Stock dividends of $17 million and $34 million, within the numerator, respectively, and excludes 32,121,000 and 32,121,000 potentially dilutive shares from the denominator, respectively, because the shares would be anti-dilutive.

(3)
The computation of diluted earnings per common share outstanding for the three and six months ended June 30, 2020 includes the reduction for Series C Preferred Stock dividends of $7 million and $7 million, respectively, including deemed
dividends on the Series C Preferred Stock from the beneficial conversion feature of $9 million and $9 million, respectively, within the numerator and excludes 29,465,000 and 14,571,000 potentially dilutive shares, respectively, of Series C Preferred Stock from the denominator because the shares would be anti-dilutive.

(4)
2,771,000 incremental common shares from assumed conversions of restricted stock have not been included in the computation of diluted earnings (loss) per share for the six months ended June 30, 2020, respectively, as their inclusion would be anti-dilutive.