Anthem Blue Cross 2002 Annual Report Download - page 78

Download and view the complete annual report

Please find page 78 of the 2002 Anthem Blue Cross annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 94

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94

NOTES
to Consolidated Financial Statements (Continued)
Anthem, Inc. 2002 Annual Report 73
will ultimately vary slightly when all distribution issues
are finalized) distributed to eligible statutory members in
the demutualization. In addition, on November 2, 2001,
Anthem issued 4,600,000 of 6.00% Equity Security Units.
Each Equity Security Unit contains a purchase contract
under which the holder agrees to purchase, for fifty dol-
lars, shares of Anthem common stock on November 15,
2004. The number of shares to be purchased will be deter-
mined based on the average trading price of Anthem
common stock at the time of settlement.
After underwriting discount and other offering and
demutualization expenses, net proceeds from the common
stock offering were approximately $1,862.8. After under-
writing discount and expenses, net proceeds from the
Equity Security Units offering were approximately
$219.8. In December 2001, proceeds from the common
stock and Equity Security Units offerings in the amount
of $2,063.6 were used to fund payments to eligible statu-
tory members of Anthem Insurance who received cash
instead of common stock in the demutualization.
11. Earnings Per Share
The denominator for basic and diluted earnings per share for 2002, and for the period from November 2, 2001 (date
of demutualization and initial public offering) through December 31, 2001 is as follows:
2002 2001
Denominator for basic earnings per share—weighted-average shares 118,988,092 103,295,675
Effect of dilutive securities—employee and director stock options
and nonvested restricted stock awards 1,280,640 313,397
Effect of dilutive securities—incremental shares from conversion
of Equity Security Unit purchase contracts 1,529,519 212,766
Denominator for diluted earnings per share 121,798,251 103,821,838
Weighted-average shares used for basic earnings per
share assumes that shares distributed to eligible statutory
members as consideration in the demutualization were
issued on the effective date of the demutualization.
Weighted-average shares used for basic earnings per share
also assumes that adjustments, if any, to the common stock
distributed in the demutualization occurred at the begin-
ning of the quarter in which changes were identified.
There were no shares or dilutive securities outstand-
ing prior to the demutualization and initial public offer-
ing. For comparative pro forma earnings per share
presentation, the weighted-average shares outstanding
and the effect of dilutive securities for the period from
November 2, 2001 to December 31, 2001 as shown above
was used to calculate pro forma earnings per share for
2001 and 2000.
Stock options, restricted stock awards and the pur-
chase contracts included in the Equity Security Units are
not considered outstanding in computing the weighted
average number of shares outstanding for basic earnings
per share, but are included, from the grant date, in deter-
mining diluted earnings per share using the treasury stock
method. The stock options are dilutive in periods when
the average market price exceeds the grant price. The
restricted stock awards are dilutive when the aggregate
fair value exceeds the amount of unearned compensation
remaining to be amortized. The purchase contracts
included in the Equity Security Units are dilutive to
Anthem’s earnings per share, because the average market
price of Anthem’s common stock exceeds a stated thresh-
old price of $43.92 per share.