Earnings Per Share

6 Months Ended

Jun. 30, 2018

Note 11: Earnings Per Share

Earnings per share is calculated using the two-class method in which earnings are allocated to common stock and participating securities based on their rights to receive nonforfeitable dividends or dividend equivalents. The Company grants restricted stock and restricted stock units to certain employees and non-employee directors in accordance with the Company’s long-term incentive programs, which entitle the participants to receive nonforfeitable dividends or dividend equivalents during the vesting period on the same basis as those dividends are paid to common shareholders. These unvested stock awards represent participating securities. During periods of net income, the calculation of earnings per share exclude the income attributable to participating securities in the numerator and the dilutive impact of these securities from the denominator. During periods of net loss, no effect is given to participating securities in the numerator and the denominator excludes the dilutive impact of these securities since they do not share in the losses of the Company.

Basic earnings per share excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of all stock options, warrants and unvested restricted stock outstanding during the period that could potentially result in the issuance of common stock. The dilution from stock options, warrants and unvested restricted stock are calculated by applying the two-class method and using the treasury stock method. The treasury stock method assumes the proceeds from the exercise of stock options and warrants or the unrecognized compensation expense from unvested restricted stock will be used to purchase shares of the Company’s common stock at the average market price during the period. If the potentially dilutive securities disclosed in the table below are either exercised or vested, the transaction would be net share settled resulting in a significantly lower impact to the outstanding share balance in comparison to the total amount of the potentially dilutive securities. During periods of net loss, stock options, warrants and unvested restricted stock are excluded from the calculation because they would have an antidilutive effect. Therefore, in periods of net loss, the calculation of basic and diluted earnings per share would result in the same value.

In the second quarter of 2018, the holder of all of the outstanding MBIA Inc. warrants exercised its right to purchase shares of MBIA Inc. common stock. As of June 30, 2018, there were no warrants outstanding. Refer to “Note 1: Business Developments and Risks and Uncertainties” for further information about the exercise of the warrants.

The following table presents the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017:

	Three Months Ended June 30,				Six Months Ended June 30,
In millions except per share amounts	2018		2017		2018			2017
Basic earnings per share:
Net income (loss) available to common shareholders	$	(146)	$	(1,229)	$	(244)	$	(1,301)

Basic weighted average shares⁽¹⁾		89.1		125.7		88.9		128.5

Net income (loss) per basic common share:	$	(1.64)	$	(9.78)	$	(2.75)	$	(10.13)

Diluted earnings per share:
Net income (loss) available to common shareholders	$	(146)	$	(1,229)	$	(244)	$	(1,301)

Diluted weighted average shares		89.1		125.7		88.9		128.5

Net income (loss) per diluted common share:	$	(1.64)	$	(9.78)	$	(2.75)	$	(10.13)

Potentially dilutive securities excluded from the calculation of
diluted EPS because of antidilutive affect ⁽²⁾		1.4		14.8		1.4		14.8
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(1) - Includes 0.8 million and 0.3 million of participating securities that met the service condition and were eligible to receive nonforfeitable dividends or dividend equivalents for the three and six months ended June 30, 2018 and 2017, respectively.
(2) - Includes securities that if exercised or vested would be net share settled resulting in a significantly lower impact to the outstanding share balance.