Quarterly report pursuant to Section 13 or 15(d)

Earnings Per Share

v3.19.2
Earnings Per Share
6 Months Ended
Jun. 30, 2019
Earnings Per Share [Abstract]  
Earnings Per Share

12. Earnings Per Share

Basic earnings per share represents net income divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share represents net income divided by the weighted-average number of common shares outstanding, inclusive of the effect of dilutive securities, such as outstanding SARs, stock units, and convertible notes.

The following are the common share amounts used to compute the basic and diluted earnings per share for each period:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

2019

 

 

June 30,

2018

 

 

June 30,

2019

 

 

June 30,

2018

 

 

 

(in millions)

 

Weighted-average shares used in basic computations

 

 

137.4

 

 

 

142.3

 

 

 

137.2

 

 

 

144.0

 

Dilutive effect of exercise of equity grants outstanding

 

 

3.6

 

 

 

6.8

 

 

 

4.2

 

 

 

7.1

 

Dilutive effect of 2019 Convertible Notes

 

 

1.4

 

 

 

2.8

 

 

 

2.8

 

 

 

1.9

 

Weighted-average shares used in diluted computations

 

 

142.4

 

 

 

151.9

 

 

 

144.2

 

 

 

153.0

 

 

There were an aggregate of 1.0 million and 1.7 million of equity grants, consisting of SARs and stock units, that were outstanding during the three months ended June 30, 2019 and 2018, respectively, and an aggregate of 1.0 million and 2.1 million of equity grants, consisting of SARs and stock units, that were outstanding during the six months ended June 30, 2019 and 2018, respectively, but were not included in the computation of diluted earnings per share because their effect would be anti-dilutive or the performance condition of the award had not been satisfied.

Since the Company will settle the principal amount of its 2019 Convertible Notes in cash and settle the conversion feature for the amount above the conversion price in common shares, or the conversion spread, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted earnings per share, if applicable. The conversion spread will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common shares for a given period exceeds the conversion price of the 2019 Convertible Notes. The dilutive impacts for the three and six months ended June 30, 2019 and 2018 are disclosed in the table above. The initial conversion rate and conversion price for the 2019 Convertible Notes are described further in Note 5, Long-Term Debt.

For the 2024 Convertible Notes, the Company has the intent and ability to settle the principal amount in cash and intends to settle the conversion feature for the amount above the conversion price, or the conversion spread, in common shares. The Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted earnings per share, if applicable. The conversion spread will have a dilutive impact on diluted earnings per share when the average market price of the Company’s common shares for a given period exceeds the conversion price of the 2024 Convertible Notes. For the three and six months ended June 30, 2019 and 2018, the 2024 Convertible Notes have been excluded from the computation of diluted earnings per share, as the effect would be anti-dilutive since the conversion price of the 2024 Convertible Notes exceeded the average market price of the Company’s common shares for the three and six months ended June 30, 2019 and 2018. The initial conversion rate and conversion price for the 2024 Convertible Notes are described further in Note 5, Long-Term Debt.

The Capped Call Transactions are excluded from the calculation of diluted earnings per share because their impact is always anti-dilutive. Additionally, the Forward Transactions are treated as retired shares for basic and diluted EPS purposes. See Note 11, Shareholders’ Deficit, for additional discussion regarding the Capped Call Transactions and Forward Transactions.

See Note 11, Shareholders’ Deficit, for a discussion of how common shares repurchased by the Company’s indirect wholly-owned subsidiary are treated under U.S. GAAP.