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Earnings Per Share Of Common Stock | 9 Months Ended
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Sep. 30, 2018
Earnings Per Share [Abstract] |
EARNINGS PER SHARE OF COMMON STOCK | EARNINGS PER SHARE OF COMMON STOCK The convertible Preferred Stock issued in January 2018 (see Note 11, "Capitalization") is considered participating securities since these shares participate in dividends on Common Stock on an "as-converted" basis. As a result, EPS of 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 stockholders. Under the two-class method, net income attributable to common stockholders is derived by subtracting the following from income from continuing operations:
• | preferred share dividends,
• | deemed dividends for the amortization of the beneficial conversion feature recognized at issuance of the Preferred Stock (if any), and
• | an allocation of undistributed earnings between the common shares and the participating securities (convertible Preferred Stock) based on their respective rights to receive dividends.
Net losses are not allocated to the convertible Preferred Stock as they do not have a contractual obligation to share in the losses of FirstEnergy. FirstEnergy allocates undistributed earnings based upon income from continuing operations. The Preferred Stock includes an embedded conversion option at a price that is below the fair value of the Common Stock on the commitment date. This beneficial conversion feature, which was approximately $296 million, represents the difference between the fair value per share of the Common Stock and the conversion price, multiplied by the number of common shares issuable upon conversion. The beneficial conversion feature was amortized as a deemed dividend over the period from the issue date to the first allowable conversion date (July 22, 2018) as a charge to OPIC, since FE is in an accumulated deficit position with no retained earnings to declare a dividend. As noted above, for EPS reporting purposes, this beneficial conversion feature will be reflected in net income (loss) attributable to common stockholders as a deemed dividend. The amount amortized for the three and nine months ended September 30, 2018, was approximately $35 million and $296 million, respectively. Basic EPS available to common stockholders is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding during the period. Participating securities are excluded from basic weighted average ordinary shares outstanding. Diluted EPS available to common stockholders is computed by dividing income available to common stockholders 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 EPS reflects the dilutive effect of potential common shares from share-based awards and convertible preferred shares. The dilutive effect of outstanding share-based awards is computed using the treasury stock method, which assumes any proceeds that could be obtained upon the exercise of the award would be used to purchase Common Stock at the average market price for the period. The dilutive effect of the convertible Preferred Stock is computed using the if-converted method, which assumes conversion of the convertible 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 stockholders. The following table reconciles basic and diluted EPS of common stock:
|  | For the Three Months Ended September 30, |  | For the Nine Months Ended September 30,
Reconciliation of Basic and Diluted EPS of Common Stock |  | 2018 |  | 2017 |  | 2018 |  | 2017
(In millions, except per share amounts) |  |  |  |  |  |  |  |
EPS of Common Stock |  |  |  |  |  |  |  |
Income from continuing operations |  | $ | 387 |  |  | $ | 301 |  |  | $ | 840 |  |  | $ | 772 |
Less: Preferred dividends |  | (19 | ) |  | — |  |  | (61 | ) |  | — |
Less: Amortization of beneficial conversion feature |  | (35 | ) |  | — |  |  | (296 | ) |  | — |
Less: Undistributed earnings allocated to preferred stockholders(1) |  | — |  |  | — |  |  | — |  |  | — |
Income from continuing operations available to common stockholders |  | 333 |  |  | 301 |  |  | 483 |  |  | 772 |
Discontinued operations, net of tax |  | (845 | ) |  | 95 |  |  | 370 |  |  | 3 |
Less: Undistributed earnings allocated to preferred stockholders (1) |  | — |  |  | — |  |  | — |  |  | — |
Income (loss) from discontinued operations available to common stockholders |  | (845 | ) |  | 95 |  |  | 370 |  |  | 3 |
Income (loss) available to common stockholders, basic and diluted |  | $ | (512 | ) |  | $ | 396 |  |  | $ | 853 |  |  | $ | 775 |
Share Count information: |  |  |  |  |  |  |  |
Weighted average number of basic shares outstanding |  | 503 |  |  | 444 |  |  | 485 |  |  | 444 |
Assumed exercise of dilutive stock options and awards |  | 2 |  |  | 2 |  |  | 2 |  |  | 1 |
Weighted average number of diluted shares outstanding |  | 505 |  |  | 446 |  |  | 487 |  |  | 445 |
Income (loss) available to common stockholders, per common share: |  |  |  |  |  |  |  |
Income from continuing operations, basic |  | $ | 0.66 |  |  | $ | 0.68 |  |  | $ | 1.00 |  |  | $ | 1.74 |
Discontinued operations, basic |  | (1.68 | ) |  | 0.21 |  |  | 0.76 |  |  | 0.01 |
Income (loss) available to common stockholders, basic |  | $ | (1.02 | ) |  | $ | 0.89 |  |  | $ | 1.76 |  |  | $ | 1.75 |
Income from continuing operations, diluted |  | $ | 0.66 |  |  | $ | 0.68 |  |  | $ | 0.99 |  |  | $ | 1.73 |
Discontinued operations, diluted |  | (1.68 | ) |  | 0.21 |  |  | 0.76 |  |  | 0.01 |
Income (loss) available to common stockholders, diluted |  | $ | (1.02 | ) |  | $ | 0.89 |  |  | $ | 1.75 |  |  | $ | 1.74 |
(1) | Undistributed earnings were not allocated to participating securities for the three and nine months ended September 30, 2018 as income from continuing operations less dividends declared (common and preferred) and deemed dividends were a net loss.
For both the three and nine months ended September 30, 2018 and 2017, one million shares from stock options and awards were excluded from the calculation of diluted shares outstanding, as their inclusion would be antidilutive to basic EPS from continuing operations. Also, 26 million shares associated with the assumed conversion of Preferred Stock were excluded, as their inclusion would be antidilutive to basic EPS from continuing operations.

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