IBM 2003 Annual Report Download - page 110

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T
earnings per share of common stock
The following table sets forth the computation of basic and diluted earnings per share of common stock.
FOR THE YEAR ENDED DECEMBER 31: 2003 2002 2001
Weighted-average number of shares on which earnings per
share calculations are based:
Basic 1,721,588,628 1,703,244,345 1,733,348,422
Add—incremental shares under stock compensation plans 29,399,287 24,807,025 36,595,476
Add—incremental shares associated with convertible notes 4,695,956 1,191,136 —
Add—incremental shares associated with contingently issuable shares 406,818 1,698,548 1,277,222
Add—incremental shares associated with put options*——9,479
Assuming dilution 1,756,090,689 1,730,941,054 1,771,230,599
(dollars in millions except per share amounts)
Income from continuing operations applicable to common stockholders $«7,613 $«5,334 $«8,136
Loss from discontinued operations 30 1,755 423
Net income from total operations on which basic earnings per share is calculated $«7,583 $«3,579 $«7,713
Income from continuing operations applicable to common stockholders $«7,613 $«5,334 $«8,136
Add—income effect of contingently issuable shares 2(18) (4)
Income from continuing operations on which diluted earnings
per share is calculated 7,615 5,316 8,132
Loss from discontinued operations on which basic and diluted earnings
per share are calculated 30 1,755 423
Net income from total operations on which diluted earnings
per share is calculated $«7,585 $«3,561 $«7,709
Earnings/(loss) per share of common stock:
Assuming dilution:
Continuing operations $«««4.34 $«««3.07 $«««4.59
Discontinued operations (0.02) (1.01) (0.24)
Total $«««4.32 $«««2.06 $«««4.35
Basic:
Continuing operations $«««4.42 $«««3.13 $«««4.69
Discontinued operations (0.02) (1.03) (0.24)
Total $«««4.40 $«««2.10 $«««4.45
*Represents short-term put option contracts sold by the company on a limited basis through private placements with independent third parties to reduce the cost of the share buy-back
program. The put option contracts that were executed permitted net share settlement at the company’s option and did not result in a put option liability in the Consolidated Statement
of Financial Position. As of December 31, 2003 and 2002, the company did not have any put option obligations outstanding.
Stock options to purchase 124,840,510 common shares in 2003, 111,713,072 common shares in 2002 and 67,596,737 common
shares in 2001 were outstanding, but were not included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price of the common shares and, therefore, the effect would have
been antidilutive. Net income applicable to common stockholders excludes preferred stock dividends of $10 million in 2001.
108
Notes to Consolidated Financial Statements
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES