Freddie Mac 2015 Annual Report Download - page 280

Financial Statements Notes to the Consolidated Financial Statements | Note 10
Freddie Mac 2015 Form 10-K 278
STOCK-BASED COMPENSATION
Following the implementation of the conservatorship in September 2008, we suspended the operation of
and/or ceased making grants under our stock-based compensation plans. Under the Purchase
Agreement, we cannot issue any new options, rights to purchase, participations or other equity interests
without Treasury’s prior approval. However, grants outstanding as of the date of the Purchase Agreement
remain in effect in accordance with their terms.
We did not repurchase or issue any of our common shares or non-cumulative preferred stock during 2015
and 2014, except for issuances of treasury stock as reported on our consolidated statements of equity
relating to stock-based compensation granted prior to conservatorship. Common stock delivered under
these stock-based compensation plans consists of treasury stock or shares acquired in market
transactions on behalf of the participants. During 2015, the deferral period lapsed on 2,981 RSUs. At
December 31, 2015, 10,750 restricted stock units remained outstanding. There are no remaining
restrictions on outstanding restricted stock units. In addition, there were 41,160 shares of restricted stock
outstanding at both December 31, 2015 and 2014. No stock options were exercised and 312,589 stock
options were forfeited or expired during 2015. At December 31, 2015, 46,416 stock options were
outstanding.
EARNINGS PER SHARE
We have participating securities related to options and restricted stock units 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. These participating securities consist of:
• Vested options to purchase common stock; and
• Vested and unvested restricted stock units that earn dividend equivalents at the same rate when and
as declared on common stock.
Consequently, in accordance with accounting guidance, we use the “two-class” method of computing
earnings per common share. The “two-class” method is an earnings allocation formula that determines
earnings per share for common stock and participating securities based on dividends declared and
participation rights in undistributed earnings.
Basic earnings per common share is computed as net income attributable to common stockholders
divided by the weighted average common shares outstanding for the period. The weighted average
common shares outstanding for the period includes the weighted average number of shares that are
associated with the warrant for our common stock issued to Treasury pursuant to the Purchase
Agreement. These shares are included since the warrant is unconditionally exercisable by the holder at a
minimal cost.
Diluted earnings per common share is computed as net income attributable to common stockholders
divided by the weighted average common shares outstanding during the period adjusted for the dilutive
effect of common equivalent shares outstanding. For periods with net income attributable to common
stockholders, the calculation includes the effect of the following common stock equivalent shares
outstanding:
• Weighted average shares related to stock options if the average market price during the period