COPT Defense Properties Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Earnings Per Share ("EPS")

Earnings Per Share ("EPS")

9 Months Ended

Sep. 30, 2023

We present both basic and diluted EPS. We compute basic EPS by dividing net (loss) income available to common shareholders allocable to unrestricted common shares under the two-class method by the weighted average number of unrestricted common shares outstanding during the period. Our computation of diluted EPS is similar except that:

•the denominator is increased to include: (1) the weighted average number of potential additional common shares that would have been outstanding if securities that are convertible into common shares were converted; and (2) the effect of dilutive potential common shares outstanding during the period attributable to redeemable noncontrolling interests and share-based compensation awards using the if-converted or treasury stock methods; and

•the numerator is adjusted to add back any changes in income or loss that would result from the assumed conversion into common shares that we add to the denominator.

Summaries of the numerator and denominator for purposes of basic and diluted EPS calculations are set forth below (in thousands, except per share data):


	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
Numerator:
(Loss) income from continuing operations	$	(221,207)	$	32,316	$	(109,167)	$	97,162
Loss (income) from continuing operations attributable to noncontrolling interests	5,020		(1,395)		2,046		(3,764)
Income from continuing operations attributable to share-based compensation awards for basic EPS	(992)		(91)		(1,093)		(295)
Numerator for basic EPS from continuing operations attributable to common shareholders	(217,179)		30,830		(108,214)		93,103

Redeemable noncontrolling interests	—		(40)		—		(109)


Adjustment to income from continuing operations attributable to share-based compensation awards for diluted EPS	—		16		—		51
Numerator for diluted EPS from continuing operations attributable to common shareholders	(217,179)		30,806		(108,214)		93,045
Discontinued operations	—		—		—		29,573
Discontinued operations attributable to noncontrolling interests	—		—		—		(421)
Income from discontinued operations attributable to share-based compensation awards for diluted EPS	—		—		—		(90)
Numerator for diluted EPS on net (loss) income attributable to common shareholders	$	(217,179)	$	30,806	$	(108,214)	$	122,107

Denominator (all weighted averages):
Denominator for basic EPS (common shares)	112,196		112,093		112,170		112,066


Dilutive effect of redeemable noncontrolling interests	—		105		—		121
Dilutive effect of share-based compensation awards	—		433		—		429
Denominator for diluted EPS (common shares)	112,196		112,631		112,170		112,616

Basic EPS attributable to common shareholders:
(Loss) income from continuing operations	$	(1.94)	$	0.28	$	(0.96)	$	0.83
Discontinued operations	—		—		—		0.26
Net (loss) income	$	(1.94)	$	0.28	$	(0.96)	$	1.09
Diluted EPS attributable to common shareholders:
(Loss) income from continuing operations	$	(1.94)	$	0.27	$	(0.96)	$	0.83
Discontinued operations	—		—		—		0.25
Net (loss) income	$	(1.94)	$	0.27	$	(0.96)	$	1.08

Our diluted EPS computations do not include the effects of the following securities since the conversions of such securities would increase diluted EPS for the respective periods (in thousands):


	Weighted Average Shares Excluded from Denominator
	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2023	2022	2023	2022
Conversion of common units	1,520	1,477	1,508	1,446
Conversion of redeemable noncontrolling interests	882	895	980	855

The following securities were also excluded from the computation of diluted EPS because their effect was antidilutive:

•weighted average restricted shares and deferred share awards for the three months ended September 30, 2023 and 2022 of 423,000 and 399,000, respectively, and for the nine months ended September 30, 2023 and 2022 of 411,000 and 401,000, respectively;

•weighted average TB-PIUs for the three months ended September 30, 2023 and 2022 of 171,000 and 192,000, respectively, and for the nine months ended September 30, 2023 and 2022 of 174,000 and 185,000, respectively;

•weighted average vested PIUs for the three and nine months ended September 30, 2023 of 170,000 and 148,000, respectively; and

•weighted average PB-PIUs for the three and nine months ended September 30, 2023 of 608,000 and 636,000, respectively.

As discussed in Note 8, our 5.25% Notes issued on September 12, 2023 have an exchange settlement feature under which the principal amount of notes exchanged is payable in cash, with the remainder of the exchange obligation, if any, as determined based on the exchange price per common share at the time of settlement, payable in cash, common shares or a combination thereof at our election. These notes did not affect our diluted EPS reported above since the weighted average closing price of our common shares for the three and nine months ended September 30, 2023 was less than the exchange price applicable to such periods.