Earnings Per Common Share

9 Months Ended

Sep. 30, 2019

EARNINGS PER COMMON SHARE

Basic earnings per common share is computed using the two-class method by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period. All outstanding unvested restricted stock awards contain rights to non-forfeitable dividends and participate in undistributed earnings with common stockholders; accordingly, they are considered participating securities that are included in the two-class method. Diluted earnings per common share measures the performance of the Company over the reporting period while giving effect to all potential common shares that were dilutive and outstanding during the period. The denominator includes the weighted average number of basic shares and the number of additional common shares that would have been outstanding if the potential common shares that were dilutive had been issued, and is calculated using either the two-class, treasury stock or as if-converted method, whichever is most dilutive. Potential common shares are securities (such as options, convertible debt, Series A Participating Redeemable Preferred Units (“Series A Units”), Series B Redeemable Preferred Units (“Series B Units”), Series C Convertible Redeemable Preferred Units (“Series C Units”), Series D Redeemable Preferred Units (“Series D Units” and, together with the Series A Units, Series B Units and Series C Units, the “Preferred OP Units”) and common Operating Partnership units (“OP Units”)) that do not have a current right to participate in earnings of the Company but could do so in the future by virtue of their option, redemption or conversion right.

In computing the dilutive effect of convertible securities, net income is adjusted to add back any changes in earnings in the period associated with the convertible security. The numerator also is adjusted for the effects of any other non-discretionary changes in income or loss that would result from the assumed conversion of those potential common shares. In computing diluted earnings per common share, only potential common shares that are dilutive (i.e. those that reduce earnings per common share) are included. For the three and nine months ended September 30, 2019, and for the three months ended September 30, 2018, there were no anti-dilutive options. For the nine months ended September 30, 2018, options to purchase an aggregate of approximately 36,404 shares of common stock were excluded from the computation of earnings per share as their effect would have been anti-dilutive.

For the purposes of computing the diluted impact of the potential exchange of the Preferred Operating Partnership units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the intent and ability to settle the redemption in shares, the Company divided the total value of the Preferred Operating Partnership units by the average share price for the period presented. The average share price for the three months ended September 30, 2019 and 2018 was $115.63 and $92.83, respectively. The average share price for the nine months ended September 30, 2019 and 2018 was $105.74 and $90.09, respectively.

The following table presents the number of Preferred Operating Partnership units, and the potential common shares, that were excluded from the computation of earnings per share as their effect would have been anti-dilutive.



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2019	2018	2019	2018
	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)	Equivalent Shares (if converted)
Series B Units	362,382	451,386	396,276	465,115
Series C Units (1)	—	319,283	—	328,994
Series D Units	1,038,538	—	1,074,417	1,021,901
	1,400,920	770,669	1,470,693	1,816,010

(1) The remainder of the Series C Units were converted to OP Units on April 25, 2019.

In July 2018, the Operating Partnership redeemed the remaining balance of its 2.375% Exchangeable Senior Notes due 2033 (the “2013 Notes”). Prior to their redemption, the 2013 Notes could potentially have had a dilutive impact on the Company’s earnings per share calculations. The 2013 Notes were exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2013 Notes. The Company had irrevocably agreed to pay only cash for the accreted principal amount of the 2013 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

The Operating Partnership had $575,000 of its 3.125% Exchangeable Senior Notes due 2035 (the “2015 Notes”) issued and outstanding as of September 30, 2019. The 2015 Notes could potentially have a dilutive impact on the Company’s earnings per share calculations. The 2015 Notes are exchangeable by holders into shares of the Company’s common stock under certain circumstances per the terms of the indenture governing the 2015 Notes. The exchange price of the 2015 Notes was $92.04 per share as of September 30, 2019, and could change over time as described in the indenture. The Company has irrevocably agreed to pay only cash for the accreted principal amount of the 2015 Notes relative to its exchange obligations, but retained the right to satisfy the exchange obligation in excess of the accreted principal amount in cash and/or common stock.

Although the Company has retained the right to satisfy the exchange obligation in excess of the accreted principal amount of the 2013 Notes and 2015 Notes in cash and/or common stock, Accounting Standards Codification (“ASC”) 260, “Earnings per Share,” requires an assumption that shares would be used to pay the exchange obligation in excess of the accreted principal amount, and requires that those shares be included in the Company’s calculation of weighted average common shares outstanding for the diluted earnings per share computation. For the three and nine months ended September 30, 2019 and 2018, zero shares related to the 2013 Notes were included in the computation for diluted earnings per share, as the Company had repaid all outstanding 2013 Notes in July 2018. For the three and nine months ended September 30, 2019 and 2018, 1,274,675 and zero shares, respectively, related to the 2015 Notes were included in the computation for diluted earnings per share.

For the purposes of computing the diluted impact on earnings per share of the potential exchange of Series A Units for common shares upon redemption, where the Company has the option to redeem in cash or shares and where the Company has stated the positive intent and ability to settle at least $101,700 of the instrument in cash (or net settle a portion of the Series A Units against the related outstanding note receivable), only the amount of the instrument in excess of $101,700 is considered in the calculation of shares contingently issuable for the purposes of computing diluted earnings per share as allowed by ASC 260-10-45-46. Accordingly, the number of shares included in the computation for diluted earnings per share related to the Series A Units is equal to the number of Series A Units outstanding, with no additional shares included related to the fixed $101,700 amount.

The computation of earnings per common share is as follows for the periods presented:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net income attributable to common stockholders	$	108,087		$	130,418		$	307,685		$	313,827
Earnings and dividends allocated to participating securities	(165		)	(219		)	(508		)	(550		)
Earnings for basic computations	107,922			130,199			307,177			313,277
Earnings and dividends allocated to participating securities	165			—			—			550
Income allocated to noncontrolling interest - Preferred Operating Partnership Units and Operating Partnership Units	6,100			7,336			17,539			17,191
Fixed component of income allocated to noncontrolling interest - Preferred Operating Partnership (Series A Units)	(572		)	(572		)	(1,716		)	(1,716		)
Net income for diluted computations	$	113,615		$	136,963		$	323,000		$	329,302

Weighted average common shares outstanding:
Average number of common shares outstanding - basic	128,776,549			126,466,837			127,830,272			125,959,926
OP Units	6,050,028			5,636,845			6,032,656			5,650,599
Series A Units	875,480			875,480			875,480			875,480
Series D Units	—			991,738			—			—
Unvested restricted stock awards included for treasury stock method	209,963			—			—			250,630
Shares related to exchangeable senior notes and dilutive stock options	1,406,455			269,390			1,425,891			279,055
Average number of common shares outstanding - diluted	137,318,475			134,240,290			136,164,299			133,015,690
Earnings per common share
Basic	$	0.84		$	1.03		$	2.40		$	2.49
Diluted	$	0.83		$	1.02		$	2.37		$	2.48