Earnings Per Share (CenterPoint Energy)

3 Months Ended

Mar. 31, 2021

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. 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 was amortized as a deemed dividend over the period from the issue date to the first allowable conversion date, which was November 6, 2020.

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 March 31,
			2021		2020
		(in millions, except per share and share amounts)
Numerator:
Income (loss) from continuing operations			$	363	$	(1,053)
Less: Preferred stock dividend requirement (Note 19)			29		29

Less: Undistributed earnings allocated to preferred shareholders			23		—
Income (loss) available to common shareholders from continuing operations - basic			311		(1,082)
Income (loss) available to common shareholders from discontinued operations - basic and diluted			—		(146)
Add back: Series B Preferred Stock dividend			17		—
Add back: Undistributed earnings allocated to preferred shareholders			23		—
Income (loss) available to common shareholders - diluted			$	351	$	(1,228)
Denominator:
Weighted average common shares outstanding - basic			551,546,000		502,388,000
Plus: Incremental shares from assumed conversions:
Restricted stock (1)			3,114,000		—
Series B Preferred Stock (2)			35,937,000		—
Series C Preferred Stock			40,823,000		—
Weighted average common shares outstanding - diluted			631,420,000		502,388,000

Earnings (Loss) Per Common Share:
Basic earnings (loss) per common share - continuing operations			$	0.56	$	(2.15)
Basic earnings (loss) per common share - discontinued operations			—		(0.29)
Basic Earnings (Loss) Per Common Share			$	0.56	$	(2.44)
Diluted earnings (loss) per common share - continuing operations			$	0.56	$	(2.15)
Diluted earnings (loss) per common share - discontinued operations			—		(0.29)
Diluted Earnings (Loss) Per Common Share			$	0.56	$	(2.44)

(1)2,567,000 incremental common shares from assumed conversions of restricted stock have not been included in the computation of diluted earnings (loss) per share for the three months ended March 31, 2020, as their inclusion would be anti-dilutive.

(2)The computation of diluted earnings per common share outstanding for the three months ended March 31, 2020 excludes 35,923,000 potentially dilutive shares from the denominator, because the shares would be anti-dilutive.