Common Stock and Earnings Per Share

9 Months Ended

Sep. 30, 2021

COMMON STOCK AND EARNINGS PER SHARE

Earnings per Share

Basic earnings per share is calculated by dividing net income, adjusted for income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflect the dilution that would occur if any potentially dilutive instruments were exercised or converted into common shares. DTE Energy’s participating securities are restricted shares under the stock incentive program that contain rights to receive non-forfeitable dividends. Equity units and performance shares do not receive cash dividends; as such, these awards are not considered participating securities.

The following is a reconciliation of DTE Energy's basic and diluted income per share calculation:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(In millions, except per share amounts)
Basic Earnings per Share
Net Income attributable to DTE Energy — continuing operations	$	58	$	372	$	495	$	844
Less: Allocation of earnings to net restricted stock awards	—		1		1		2
	$	58	$	371	$	494	$	842
Net Income (Loss) attributable to DTE Energy — discontinued operations	(33)		104		106		249
Net income available to common shareholders — basic	$	25	$	475	$	600	$	1,091

Average number of common shares outstanding — basic	193		193		193		192

Income from continuing operations	$	0.30	$	1.93	$	2.55	$	4.37
Income (loss) from discontinued operations	(0.17)		0.54		0.55		1.30
Basic Earnings per Common Share	$	0.13	$	2.47	$	3.10	$	5.67

Diluted Earnings per Share
Net Income attributable to DTE Energy — continuing operations	$	58	$	372	$	495	$	844
Less: Allocation of earnings to net restricted stock awards	—		1		1		2
	$	58	$	371	$	494	$	842
Net Income (Loss) attributable to DTE Energy — discontinued operations	(33)		104		106		249
Net income available to common shareholders — diluted	$	25	$	475	$	600	$	1,091

Average number of common shares outstanding — basic	193		193		193		192

Average dilutive equity units, performance share awards, and stock options	1		—		1		1
Average number of common shares outstanding — diluted	194		193		194		193

Income from continuing operations	$	0.30	$	1.92	$	2.55	$	4.37
Income (loss) from discontinued operations	(0.17)		0.54		0.55		1.29
Diluted Earnings per Common Share(a)	$	0.13	$	2.46	$	3.10	$	5.66

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(a)Equity Units excluded from the calculation of diluted EPS were approximately 11.1 million and 10.3 million for the three months ended September 30, 2021 and 2020, respectively, and 11.5 million and 10.3 million for the nine months ended September 30, 2021 and 2020, respectively, as the dilutive stock price threshold was not met.

Stock Purchase Contract Adjustments

In December 2019, DTE Energy closed on the purchase of midstream natural gas assets. The acquisition was financed through the issuance of Senior Notes, common stock, and $1.3 billion of Equity Units. Each Equity Unit has a stated amount of $50 and was initially issued in the form of a Corporate Unit, comprised of (i) a forward purchase contract to buy DTE Energy common stock (stock purchase contract) and (ii) a 1/20 undivided beneficial ownership interest in a $1,000 principal amount of DTE Energy’s 2019 Series F 2.25% RSNs due 2025.

The stock purchase contract obligates the holder to purchase from DTE Energy on the settlement date, November 1, 2022, for a price of $50 per stock purchase contract, a certain number of shares of DTE Energy’s common stock. As a result of the spin-off of DT Midstream in July 2021, there was a change in the settlement rates in the stock purchase contract to reflect the dividend of DT Midstream stock to DTE Energy shareholders. As adjusted for this change, anti-dilution adjustments to date, and subject to future anti-dilution adjustments, the following number of shares must be purchased:

•if the AMV of DTE Energy’s common stock, which is the average volume-weighted average price of DTE Energy’s common stock for the trading days during the 20 consecutive scheduled trading day period ending on the third scheduled trading day immediately preceding the stock purchase contract settlement date, is equal to or greater than $133.08, 0.3757 shares of common stock;

•if the AMV is less than $133.08 but greater than $106.50, a number of shares of common stock equal to $50 divided by the AMV; and

•if the AMV is less than or equal to $106.50, 0.4695 shares of common stock.

The present value of future contract adjustment payments of $150 million was initially recorded as a reduction of shareholders’ equity, offset by the stock purchase contract liability. The stock purchase contract liability was not impacted by the change in settlement rates and a liability of $64 million remains included in Current Liabilities — Other and Other Liabilities — Other on DTE Energy’s Consolidated Statements of Financial Position as of September 30, 2021. DTE Energy will continue issuing quarterly payments through the settlement date of November 1, 2022.

The treasury stock method is used to compute diluted EPS for the stock purchase contract. Under the treasury stock method, the stock purchase contract will only have a dilutive effect when the settlement rate is based on the market value of DTE’s common stock that is greater than $133.08 (the threshold appreciation price). At September 30, 2021, the stock purchase price contract was anti-dilutive and, therefore, not included in the computation of diluted earnings per share.

Until settlement of the stock purchase contracts, the shares of stock underlying each contract are not outstanding. Under the terms of the stock purchase contracts, assuming no anti-dilution or other adjustments, DTE Energy will issue between 9.8 million and 12.2 million shares of its common stock in November 2022. A total of 13 million shares of DTE Energy’s common stock have been reserved for issuance in connection with the stock purchase contracts.

For additional information regarding the equity units, refer to Note 15, "Long-term Debt" in the combined DTE Energy and DTE Electric 2020 Annual Report on Form 10-K.