General Motors 2014 Annual Report Download - page 125

GENERAL MOTORS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Note 22. Earnings Per Share
Basic and diluted earnings per share are computed by dividing Net income attributable to common stockholders by the weighted-
average common shares outstanding in the period. Diluted earnings per share is computed by giving effect to all potentially dilutive
securities that are outstanding. The following table summarizes basic and diluted earnings per share (in millions, except for per share
amounts):
Years Ended December 31,
2014 2013 2012
Basic earnings per share
Net income attributable to stockholders ............................................... $ 3,949 $ 5,346 $ 6,188
Less: cumulative dividends on preferred stock and charge related to redemption and purchase of
preferred stock (a) .............................................................. (1,145) (1,576) (859)
Less: undistributed earnings allocated to Series B Preferred Stock participating security ......... — (470)
Net income attributable to common stockholders ........................................ $ 2,804 $ 3,770 $ 4,859
Weighted-average common shares outstanding — basic ................................ 1,605 1,393 1,566
Basic earnings per common share .................................................... $ 1.75 $ 2.71 $ 3.10
Diluted earnings per share
Net income attributable to stockholders ............................................... $ 3,949 $ 5,346 $ 6,188
Add: preferred dividends to holders of Series B Preferred Stock ............................ 218 —
Less: cumulative dividends on preferred stock and charge related to redemption and purchase of
preferred stock (a) .............................................................. (1,145) (1,576) (859)
Less: undistributed earnings allocated to Series B Preferred Stock participating security ......... — (442)
Less: earnings adjustment for dilutive stock compensation ................................ (18)
Net income attributable to common stockholders ........................................ $ 2,786 $ 3,988 $ 4,887
Weighted-average common shares outstanding — diluted
Weighted-average common shares outstanding — basic .................................. 1,605 1,393 1,566
Dilutive effect of warrants and RSUs ................................................. 82 149 109
Dilutive effect of conversion of Series B Preferred Stock ................................. 134 —
Weighted-average common shares outstanding — diluted ................................. 1,687 1,676 1,675
Diluted earnings per common share .................................................. $ 1.65 $ 2.38 $ 2.92
(a) Includes earned but undeclared dividends of $15 million and $26 million on our Series A Preferred Stock in the years ended December 31, 2013
and 2012 and $20 million on our Series B Preferred Stock in the year ended December 31, 2012.
Prior to the December 2013 conversion to common shares, holders of the Series B Preferred Stock had a right to participate in our
undistributed earnings because a dividend, if declared, would result in a transfer of value to the holder through an adjustment to the
fixed conversion ratios according to various anti-dilution provisions. Based on the nature of the Series B Preferred Stock and the
nature of these anti-dilution provisions, we concluded that the Series B Preferred Stock was a participating security and, as such,
requires the application of the more dilutive of the two-class or if-converted method to calculate earnings per share when the
applicable market value of our common stock is below or above the range of $33.00 to $39.60 per common share. The calculation of
the applicable market value is applied to the full year, irrespective of the applicable market value computed during the prior quarters
of the current year. On the mandatory conversion date of our Series B Preferred Stock, December 1, 2013, the applicable market value
of our common stock was within the range of $33.00 to $39.60 per common share and, as such, we applied the if-converted method
for purposes of calculating diluted earnings per share in the year ended December 31, 2013. The impact on diluted earnings per share
was an increase of $0.13 in the year ended December 31, 2013 using the if-converted as compared to the two-class method.
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