SEMPRA ENERGY - SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2020

SEMPRA ENERGY - SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

SEMPRA ENERGY – SHAREHOLDERS’ EQUITY AND EARNINGS PER COMMON SHARE

SEMPRA ENERGY COMMON STOCK REPURCHASES

On September 11, 2007, our board of directors authorized the repurchase of shares of our common stock, provided that the amounts spent for such purpose do not exceed the greater of $2 billion or amounts spent to purchase no more than 40 million shares. On July 1, 2020, we entered into an ASR program under which we prepaid $500 million to repurchase shares of our common stock in a share forward transaction. The total number of shares purchased was determined by dividing the $500 million purchase price by the arithmetic average of the volume-weighted average trading prices of shares of our common stock during the valuation period of July 2, 2020 through August 4, 2020, minus a fixed discount. The program was completed on August 4, 2020 with an aggregate of 4,089,375 shares of Sempra Energy common stock repurchased at an average price of $122.27 per share. Following the completion of the ASR program, the aggregate dollar amount authorized by the September 11, 2007 share repurchase authorization was exhausted.

On July 6, 2020, our board of directors authorized the repurchase of shares of our common stock at any time and from time to time in an aggregate amount not to exceed the lesser of $2 billion or amounts spent to purchase no more than 25 million shares. No shares have been repurchased under this authorization.

SEMPRA ENERGY COMMON STOCK OFFERINGS

In January 2018, we completed the offering of 26,869,158 shares of our common stock, no par value, in a registered public offering at $107.00 per share (approximately $105.07 per share after deducting underwriting discounts), with 23,364,486 shares pursuant to forward sale agreements. We received net proceeds totaling approximately $2.8 billion to fully settle these shares, as follows:

▪$367 million (net of underwriting discounts and equity issuance costs of $8 million) to cover overallotment shares of 3,504,672 in the first quarter of 2018 at a settlement price of $105.07 per share;

▪$900 million (net of underwriting discounts of $16 million) from the settlement of 8,556,630 shares in the first quarter of 2018 at a forward sale price of $105.18 per share;

▪$800 million (net of underwriting discounts of $14 million) from the settlement of 7,651,671 shares in the second quarter of 2018 at forward sale prices ranging from $104.53 to $104.58 per share; and

▪$728 million (net of underwriting discounts of $13 million) from the settlement of 7,156,185 shares in the third quarter of 2019 at a forward sale price of $101.74 per share.

In July 2018, we completed the offering of 11,212,500 shares of our common stock, no par value, in a registered public offering at $113.75 per share (approximately $111.87 per share after deducting underwriting discounts), with 9,750,000 shares pursuant to forward sale agreements. We received net proceeds totaling approximately $1.2 billion to fully settle these shares, as follows:

▪$164 million (net of underwriting discounts and equity issuance costs of $3 million) to cover overallotment shares of 1,462,500 in the third quarter of 2018 at a settlement price of $111.87 per share; and

▪$1,066 million (net of underwriting discounts of $18 million) from the settlement of 9,750,000 shares in the fourth quarter of 2019 at a forward sale price of $109.33 per share.

EARNINGS PER COMMON SHARE

Basic EPS is calculated by dividing earnings attributable to common shares (from both continuing and discontinued operations) by the weighted-average number of common shares outstanding for the period. Diluted EPS includes the potential dilution of common stock equivalent shares that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.


EARNINGS PER COMMON SHARE COMPUTATIONS
(Dollars in millions, except per share amounts; shares in thousands)
	Years ended December 31,
	2020		2019		2018
Numerator for continuing operations:
Income from continuing operations, net of income tax	$	2,255	$	1,999	$	938
Earnings attributable to noncontrolling interests	(162)		(129)		(44)
Preferred dividends	(168)		(142)		(125)
Preferred dividends of subsidiary	(1)		(1)		(1)
Earnings from continuing operations attributable to common shares	$	1,924	$	1,727	$	768

Numerator for discontinued operations:
Income from discontinued operations, net of income tax	$	1,850	$	363	$	188
Earnings attributable to noncontrolling interests	(10)		(35)		(32)
Earnings from discontinued operations attributable to common shares	$	1,840	$	328	$	156

Numerator for earnings:
Earnings attributable to common shares	$	3,764	$	2,055	$	924

Denominator:
Weighted-average common shares outstanding for basic EPS(1)	291,077		277,904		268,072
Dilutive effect of stock options and RSUs(2)	1,175		1,585		919
Dilutive effect of common shares sold forward	—		2,544		861
Weighted-average common shares outstanding for diluted EPS	292,252		282,033		269,852

Basic EPS:
Earnings from continuing operations	$	6.61	$	6.22	$	2.86
Earnings from discontinued operations	$	6.32	$	1.18	$	0.59
Earnings	$	12.93	$	7.40	$	3.45

Diluted EPS:
Earnings from continuing operations	$	6.58	$	6.13	$	2.84
Earnings from discontinued operations	$	6.30	$	1.16	$	0.58
Earnings	$	12.88	$	7.29	$	3.42

(1) Includes fully vested RSUs held in our Deferred Compensation Plan of 537 in 2020, 617 in 2019 and 641 in 2018. These fully vested RSUs are included in weighted-average common shares outstanding for basic EPS because there are no conditions under which the corresponding shares will not be issued.

(2) Due to market fluctuations of both Sempra Energy common stock and the comparative indices used to determine the vesting percentage of our total shareholder return performance-based RSUs, which we discuss in Note 10, dilutive RSUs may vary widely from period-to-period.

The potentially dilutive impact from stock options and RSUs is calculated under the treasury stock method. Under this method, proceeds based on the exercise price and unearned compensation are assumed to be used to repurchase shares on the open market at the average market price for the period, reducing the number of potential new shares to be issued and sometimes causing an antidilutive effect. The computation of diluted EPS for 2020, 2019 and 2018 excludes potentially dilutive shares of 187,028, 80,281 and 20,814, respectively, because to include them would be antidilutive for the period. However, these shares could potentially dilute basic EPS in the future.

The potentially dilutive impact from the forward sale of our common stock pursuant to the forward sale agreements that we discuss above is reflected in our diluted EPS calculation using the treasury stock method. We have fully settled all forward sale agreements and those shares are included in weighted-average common shares outstanding for basic EPS.

The potentially dilutive impact from our mandatory convertible preferred stock is calculated under the if-converted method. The computation of diluted EPS for the years ended December 31, 2020, 2019 and 2018 excludes 17,889,365, 17,471,375 and 17,197,035 potentially dilutive shares, respectively, because to include them would be antidilutive for those periods. However, these shares could potentially dilute basic EPS in the future. We discuss the 2018 issuances of our mandatory convertible preferred stock and conversion of the series A preferred stock to Sempra Energy common stock on January 15, 2021 in Note 13.

We are authorized to issue 750 million shares of no par value common stock. The following table provides common stock activity for the last three years.


COMMON STOCK ACTIVITY

	Years ended December 31,
	2020	2019	2018
Common shares outstanding, January 1	291,712,925	273,769,513	251,358,977
Shares issued under forward sale agreements	—	16,906,185	21,175,473
RSUs vesting(1)	896,839	463,012	509,042
Stock options exercised	4,400	52,540	138,861
Savings plan issuance	201,431	475,774	553,036
Common stock investment plan(2)	42,955	199,253	231,242
Issuance of RSUs held in our Deferred Compensation Plan	103,552	59,470	3,357
Shares repurchased(3)	(4,491,858)	(212,822)	(200,475)
Common shares outstanding, December 31	288,470,244	291,712,925	273,769,513

(1) Includes dividend equivalents.

(2) Participants in the Direct Stock Purchase Plan may reinvest dividends to purchase newly issued shares.

(3) Generally, we purchase shares of our common stock or units from LTIP participants who elect to sell to us a sufficient number of vested RSUs to meet minimum statutory tax withholding requirements. In 2020, shares repurchased includes shares repurchased under the ASR program that we discuss above.