Capital Stock and Earnings Per Share

12 Months Ended

Dec. 31, 2019

NOTE 18. CAPITAL STOCK AND EARNINGS PER SHARE

Common Stock

Under our amended and restated certificate of incorporation, as of July 1, 2016, our authorized capital stock consists of 2.0 billion common shares with a par value of $0.01 per share and 15 million preferred shares with a par value of $0.01 per share.

Each share of our common stock entitles the holder to one vote on all matters to be voted upon by common stockholders. Our Board is authorized to issue shares of preferred stock in one or more series and has discretion to determine the rights, preferences, privileges, and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, and liquidation preferences, of each series of preferred stock. The Board’s authority to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock, could potentially discourage attempts by third parties to obtain control of the Company through certain types of takeover practices.

We declared and paid cash dividends per common share during the periods presented as follows:



	Dividend Per Common Share		Amount ($ in millions)
2019:
First quarter	$	0.07	$	23.4
Second quarter	0.07		23.4
Third quarter	0.07		23.5
Fourth quarter	0.07		23.5
Total	$	0.28	$	93.8

2018:
First quarter	$	0.07	$	24.3
Second quarter	0.07		24.4
Third quarter	0.07		24.5
Fourth quarter	0.07		23.4
Total	$	0.28	$	96.6

The sum of the components of total dividends paid may not equal the total amount due to rounding.

Aggregate cash payments for the dividends paid to shareholders are recorded as dividends to shareholders in our Consolidated Statements of Changes in Equity and Consolidated Statements of Cash Flows.

On January 28, 2020 we declared a regular quarterly cash dividend of $0.07 per share payable on March 27, 2020 to common stockholders of record on February 28, 2020.

Mandatory Convertible Preferred Stock

On June 29, 2018, we issued 1,380,000 shares of 5.0% Mandatory Convertible Preferred Stock, Series A (“MCPS”) with a par value of $0.01 per share and liquidation preference of $1,000 per share, which included the exercise of an over-allotment option in full to purchase 180,000 shares. We received net $1.34 billion in proceeds from the issuance of the MCPS, excluding $43 million of issuance costs. We used the net proceeds from the issuance of MCPS to fund our acquisition activities and for general corporate purposes, including repayment of debt, working capital, and capital expenditures.

In connection with the split-off of the A&S Business, on September 26, 2018, we triggered an anti-dilution adjustment pursuant to the terms of the MCPS, and after giving affect to this adjustment, each then outstanding share of MCPS will convert automatically on July 1, 2021 (“Mandatory Conversion Date”) into between 10.9041 and 13.3575 common shares, subject to further anti-dilution adjustments. The number of shares of our common stock issuable on conversion will be determined based on the average volume weighted average price per share of our common stock over the 20 consecutive trading day period beginning on the 22nd scheduled trading day preceding the Mandatory Conversion Date. At any time prior to July 1, 2021, holders may elect to convert each share of the MCPS into shares of common stock at the rate of 10.9041, subject to further anti-dilution adjustments. In the event of a fundamental change, the MCPS will convert at the fundamental change rates specified in the certificate of designations, as adjusted, and the holders of MCPS would be entitled to a fundamental change make-whole dividend.

We may pay declared dividends in cash or, subject to certain limitations, in shares of our common stock, or in any combination of cash and shares of our common stock in January, April, July, and October of each year, commencing on October 1, 2018 and ending on July 1, 2021. Dividends that are declared will be payable on the dividend payment dates to holders of record on the immediately preceding March 15, June 15, September 15, and December 15 (each a “record date”), whether or not such holders convert their shares, or such shares are automatically converted, after the corresponding record date.

Dividends on our MCPS are payable on a cumulative basis when, as, and if declared by our Board, at an annual rate of 5.0% of the liquidation preference of $1,000 per share (equivalent to $50.00 annually per share).

We declared and paid cash dividends on our MCPS during the periods presented as follows:



	Dividend Per Preferred Share		Amount ($ in millions)
2019:
First quarter	$	12.50	$	17.3
Second quarter	12.50		17.2
Third quarter	12.50		17.3
Fourth quarter	12.50		17.2
Total	$	50.00	$	69.0

2018:
Third quarter	$	12.78	$	17.6
Fourth quarter	12.50		17.3
Total	$	25.28	$	34.9

On January 28, 2020 we declared a regular quarterly cash dividend of $12.50 per share on our MCPS payable on April 1, 2020 to preferred stockholders of record on March 15, 2020.

Net earnings per share

Basic net earnings per share (“EPS”) from continuing operations is calculated by dividing net earnings from continuing operations by the weighted average number of shares of common stock outstanding for the applicable period. Diluted EPS from continuing operations is similarly calculated, except that the calculation includes the dilutive effect of the assumed issuance of shares under stock-based compensation plans except where the inclusion of such shares would have an anti-dilutive impact.

For the year ended December 31, 2019, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were 3.0 million shares. For the years ended December 31, 2018 and 2017, the anti-dilutive options to purchase shares excluded from the diluted EPS calculation were immaterial. The impact of our MCPS calculated under the if-converted method were anti-dilutive, and as such, 18.3 million and 18.4 million shares were excluded from the dilutive EPS calculation for the years ended December 31, 2019 and December 31, 2018, respectively.

Information related to the calculation of net earnings per share of common stock is summarized as follows ($ and shares in millions, except per share amounts)



	Year Ended December 31,
	2019			2018			2017
Numerator
Net earnings from continuing operations	$	725.4		$	918.3		$	884.3
Mandatory convertible preferred stock cumulative dividends	(69.0		)	(34.9		)	—
Net earnings attributable to common stockholders from continuing operations	$	656.4		$	883.4		$	884.3

Denominator
Weighted average common shares outstanding used in basic earnings per share	335.8			345.5			347.5
Incremental common shares from:
Assumed exercise of dilutive options and vesting of dilutive Stock Awards	4.2			5.2			5.1
Weighted average common shares outstanding used in diluted earnings per share	340.0			350.7			352.6

Net earnings from continuing operations per common share - Basic	$	1.95		$	2.56		$	2.54
Net earnings from continuing operations per common share - Diluted	$	1.93		$	2.52		$	2.51