Earnings Per Share

3 Months Ended

Mar. 31, 2022

Basic and diluted earnings per share are based on the weighted average number of shares of common stock and potential common stock outstanding during the period. Potential common stock, for purposes of determining diluted earnings per share, includes the effects of dilutive RSUs, stock options, and equity units. The effect of such potential common stock is computed using the treasury stock method for RSUs and stock options, and is computed using the if-converted method for equity units.

The following table is a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation for income from continuing operations for the three months ended March 31, 2022 and 2021, where income represents the numerator and weighted average shares represent the denominator.


Three Months Ended March 31,	2022					2021
(in millions, except per share data)	Income		Shares	$ per Share		Loss		Shares	$ per Share

BASIC EARNINGS (LOSS) PER SHARE
Income (loss) from continuing operations attributable to The AES Corporation common stockholders	$	115	668	$	0.17	$	(148)	666	$	(0.22)
EFFECT OF DILUTIVE SECURITIES

Stock options	—		1	—		—		—	—
Restricted stock units	—		2	—		—		—	—
Equity units	—		40	(0.01)		—		—	—
DILUTED EARNINGS (LOSS) PER SHARE	$	115	711	$	0.16	$	(148)	666	$	(0.22)

The calculation of diluted earnings per share excluded 2 million outstanding stock awards for the three months ended March 31, 2022, which would be anti-dilutive. These stock awards could potentially dilute basic earnings per share in the future.

For the three months ended March 31, 2021, the calculation of diluted earnings per share excluded 5 million outstanding stock awards because their impact would be anti-dilutive given the loss from continuing operations. These stock awards could potentially dilute basic earnings per share in the future. Had the Company generated income, 4 million potential shares of common stock related to the stock awards would have been included in diluted weighted-average shares outstanding. Due to the full retrospective adoption of ASU 2020-06, an additional 2 million potential shares of common stock related to the assumed share settlement of the Contract Adjustment Payments would have been included in diluted weighted-average shares outstanding.

As described in Note 11—Equity, the Company issued 10,430,500 Equity Units in March 2021 with a total notional value of $1,043 million. Each Equity Unit has a stated amount of $100 and was initially issued as a Corporate Unit, consisting of a 2024 Purchase Contract and a 10% undivided beneficial ownership interest in one share of Series A Preferred Stock. Prior to February 15, 2024, the Series A Preferred Stock may be converted at the option of the holder only in connection with a fundamental change. On and after February 15, 2024, the Series A Preferred Stock may be converted freely at the option of the holder. Upon conversion, the Company will deliver to the holder with respect to each share of Series A Preferred Stock being converted (i) a share of our Series B Preferred Stock, or, solely with respect to conversions in connection with a redemption, cash and (ii) shares of our common stock, if any, in respect of any conversion value in excess of the liquidation preference of the preferred stock being converted. The conversion rate was initially 31.5428 shares of common stock per one share of Series A Preferred Stock, which was equivalent to an initial conversion price of approximately $31.70 per share of common stock. As of March 31, 2022, due to customary anti-dilution provisions, the conversion rate was 31.5536, equivalent to a conversion price of approximately $31.69 per share of common stock. The Series A Preferred Stock and the 2024 Purchase Contracts are being accounted for as one unit of account. In calculating diluted EPS, the Company has applied the if-converted method