Freddie Mac 2009 Annual Report Download - page 320

On September 19, 2008, FHFA, as Conservator, advised us of FHFA’s determination that no further common or
preferred stock dividends should be paid by our REIT subsidiaries. FHFA specifically directed us, as the controlling
stockholder of both REIT subsidiaries and the boards of directors of both companies, not to declare or pay any dividends on
the preferred stock of the REITs until FHFA directs otherwise. However, at our request and with Treasury’s consent, FHFA
directed us and the boards of directors of our REIT subsidiaries to (i) declare and pay dividends for one quarter on the
preferred shares of our REIT subsidiaries during the fourth quarter of 2009 which the REITs paid for the quarter ended
September 30, 2008 and (ii) take all steps necessary to effect the elimination of the REITs by merger in a timely and
expeditious manner. As a result of this dividend payment, the terms of the REIT preferred stock that permit the preferred
stockholders to elect a majority of the members of each REIT’s board of directors were not triggered. No other common or
preferred dividends were declared by our REIT subsidiaries during 2009. Consequently, absent further direction from FHFA
to declare and pay dividends (within the time constraints set forth in the Internal Revenue Code) on the REIT preferred and
common stock, the REITs will no longer qualify as REITs for federal income tax purposes retroactively to January 1, 2009.
With regard to dividends on the preferred stock of the REITs held by third parties, there were $8 million and $3 million of
dividends in arrears as of December 31, 2009 and 2008, respectively.
NOTE 21: EARNINGS (LOSS) PER SHARE
We have participating securities related to options with dividend equivalent rights that receive dividends as declared on
an equal basis with common shares but are not obligated to participate in undistributed net losses. Consequently, in
accordance with accounting standards for earnings per share, we use the “two-class” method of computing earnings per
share. Basic earnings per common share are computed by dividing net income (loss) available to common stockholders by
weighted average common shares outstanding — basic for the period. The weighted average common shares outstanding —
basic during the years ended December 31, 2009 and 2008 include the weighted average number of shares during the periods
that are associated with the warrant for our common stock issued to Treasury as part of the Purchase Agreement since the
warrant is unconditionally exercisable by the holder at a minimal cost. See “NOTE 2: CONSERVATORSHIP AND
RELATED DEVELOPMENTS” for further information. On January 1, 2009, we adopted an amendment to accounting for
earnings per share, which had no significant impact on our earnings (loss) per share.
Diluted earnings (loss) per common share are computed as net income (loss) available to common stockholders divided
by weighted average common shares outstanding — diluted for the period, which considers the effect of dilutive common
equivalent shares outstanding. For periods with net income, the effect of dilutive common equivalent shares outstanding
includes: (a) the weighted average shares related to stock options (including our employee stock purchase plan); and (b) the
weighted average of non-vested restricted shares and non-vested restricted stock units. Such items are included in the
calculation of weighted average common shares outstanding — diluted during periods of net income, when the assumed
conversion of the share equivalents has a dilutive effect. Such items are excluded from the weighted average common shares
outstanding — basic.
Table 21.1 — Earnings (Loss) Per Common Share — Basic and Diluted
2009 2008 2007
Year Ended December 31,
(dollars in millions,
except per share amounts)
Net loss attributable to Freddie Mac . . . ............................................ $ (21,553) $ (50,119) $ (3,094)
Preferred stock dividends and issuance costs on redeemed preferred stock
(1)
.................... (4,105) (675) (404)
Amounts allocated to participating security option holders
(2)
............................... — (1) (5)
Net loss attributable to common stockholders ......................................... $ (25,658) $ (50,795) $ (3,503)
Weighted average common shares outstanding — basic (in thousands)
(3)
....................... 3,253,836 1,468,062 651,881
Dilutive potential common shares (in thousands) . .................................... — — —
Weighted average common shares outstanding — diluted (in thousands) ....................... 3,253,836 1,468,062 651,881
Basic earnings (loss) per common share . ............................................ $ (7.89) $ (34.60) $ (5.37)
Diluted earnings (loss) per common share ........................................... $ (7.89) $ (34.60) $ (5.37)
Antidilutive potential common shares excluded from the computation of dilutive potential common
shares (in thousands) ........................................................ 7,541 10,611 8,580
(1) Consistent with the covenants of the Purchase Agreement, we paid dividends on our senior preferred stock, but did not declare dividends on any other
series of preferred stock outstanding subsequent to entering conservatorship.
(2) Represents distributed earnings during periods of net losses. Effective January 1, 2009, we retrospectively adopted an amendment to the accounting
standards for earnings per share and began including distributed and undistributed earnings associated with unvested stock awards, net of amounts
included in compensation expense associated with these awards.
(3) Includes the weighted average number of shares during 2009 and 2008 that are associated with the warrant for our common stock issued to Treasury as
part of the Purchase Agreement. This warrant is included in shares outstanding — basic, since it is unconditionally exercisable by the holder at a
minimal cost of $0.00001 per share.
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