Assumed conversion of preferred stock (in shares)

  
of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised.  
During 2019, EPS was computed using the two-class method required for participating securities. The convertible preferred stock issued in January 2018 were considered participating securities since the shares participated in dividends on common stock on an “as-converted” basis. All convertible preferred stock outstanding was converted to common stock during 2019.   
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 stock 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 stock and the participating securities (convertible preferred stock) based on their respective rights to receive dividends.   
Net losses were not allocated to the convertible preferred stock as they did not have a contractual obligation to share in the losses of FirstEnergy. FirstEnergy allocated undistributed earnings based upon income from continuing operations.   
Diluted EPS reflects the dilutive effect of potential common shares from share-based awards and convertible shares of preferred stock. The dilutive effect of outstanding share-based awards was 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 in 2019 was 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 stock dividends and undistributed earnings allocated to preferred stockholders. 

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | For the Years Ended December 31, |
| Reconciliation of Basic and Diluted EPS of Common Stock |  | 2021 |  | 2020 |  | 2019 |
| (In millions, except per share amounts) |  |  |  |  |  |  |
| EPS of Common Stock  |  |  |  |  |  |  |
| Income from continuing operations |  | $ | 1,239  |  |  | $ | 1,003  |  |  | $ | 904  |  |
| Less: Preferred dividends  |  | N/A |  | N/A |  | (3) |  |
| Less: Undistributed earnings allocated to preferred stockholders |  | N/A |  | N/A |  | (1) |  |
| Income from continuing operations available to common stockholders |  | 1,239  |  |  | 1,003  |  |  | 900  |  |
| Discontinued operations, net of tax |  | 44  |  |  | 76  |  |  | 8  |  |
| Less: Undistributed earnings allocated to preferred stockholders |  | N/A |  | N/A |  | —  |  |
| Income from discontinued operations available to common stockholders |  | 44  |  |  | 76  |  |  | 8  |  |
|  |  |  |  |  |  |  |
| Income attributable to common stockholders, basic |  | $ | 1,283  |  |  | $ | 1,079  |  |  | $ | 908  |  |
|  |  |  |  |  |  |  |
| Income allocated to preferred stockholders, preferred dilutive |  | N/A |  | N/A |  | 4 |
|  |  |  |  |  |  |  |
| Income attributable to common stockholders, dilutive |  | $ | 1,283  |  |  | $ | 1,079  |  |  | $ | 912  |  |
|  |  |  |  |  |  |  |
| Share Count information: |  |  |  |  |  |  |
| Weighted average number of basic shares outstanding |  | 545  |  |  | 542  |  |  | 535  |  |
| Assumed exercise of dilutive share based awards |  | 1  |  |  | 1  |  |  | 3  |  |
| Assumed conversion of preferred stock  |  | N/A |  | N/A |  | 4  |  |
| Weighted average number of diluted shares outstanding |  | 546  |  |  | 543  |  |  | 542  |  |
|  |  |  |  |  |  |  |
| Income attributable to common stockholders, per common share: |  |  |  |  |  |  |
| Income from continuing operations, basic |  | $ | 2.27  |  |  | $ | 1.85  |  |  | $ | 1.69  |  |
| Discontinued operations, basic  |  | 0.08  |  |  | 0.14  |  |  | 0.01  |  |
| Income attributable to common stockholders, basic  |  | $ | 2.35  |  |  | $ | 1.99  |  |  | $ | 1.70  |  |
|  |  |  |  |  |  |  |
| Income from continuing operations, diluted |  | $ | 2.27  |  |  | $ | 1.85  |  |  | $ | 1.67  |  |
| Discontinued operations, diluted |  | 0.08  |  |  | 0.14  |  |  | 0.01  |  |
| Income attributable to common stockholders, diluted |  | $ | 2.35  |  |  | $ | 1.99  |  |  | $ | 1.68  |  |

  
  
80
