JP Morgan Chase 2008 Annual Report Download - page 141

JPMorgan Chase & Co./ 2008 Annual Report 139
Condensed statement of net assets acquired
The following reflects the value assigned to Bear Stearns net assets
as of the merger date.
(in millions) May 30, 2008
Assets
Cash and due from banks $ 534
Federal funds sold and securities purchased under
resale agreements 21,204
Securities borrowed 55,195
Trading assets 136,535
Loans 4,407
Accrued interest and accounts receivable 34,677
Goodwill 761
All other assets 35,418
Total assets $ 288,731
Liabilities
Federal funds purchased and securities loaned or sold
under repurchase agreements $ 54,643
Other borrowings 16,166
Trading liabilities 24,267
Beneficial interests issued by consolidated VIEs 47,042
Long-term debt 67,015
Accounts payable and other liabilities 78,532
Total liabilities 287,665
Bear Stearns net assets(a) $ 1,066
(a) Reflects the fair value assigned to 49.4% of the Bear Stearns net assets acquired on
April 8, 2008 (net of related amortization), and the fair value assigned to the remaining
50.6% of the Bear Stearns net assets acquired on May 30, 2008. The difference
between the Bear Stearns net assets acquired as presented above and the fair value of
the net assets acquired (including goodwill) presented in the previous table represents
JPMorgan Chase’s net losses recorded under the equity method of accounting.
Unaudited pro forma condensed combined financial infor-
mation reflecting Bear Stearns merger and Washington
Mutual transaction
The following unaudited pro forma condensed combined financial infor-
mation presents the results of operations of the Firm as they may have
appeared if the Bear Stearns merger and the Washington Mutual trans-
action had been completed on January 1, 2008, and January 1, 2007.
Year ended December 31,
(in millions, except per share data) 2008 2007
Total net revenue $ 68,071 $ 92,052
Income (loss) before extraordinary gain (14,141) 17,733
Net income (loss) (12,235) 17,733
Net income per common share data:
Basic earnings per share
Income (loss) before extraordinary gain $ (4.22) $ 5.16
Net income (loss) (3.68) 5.16
Diluted earnings per share(a)
Income (loss) before extraordinary gain (4.22) 5.01
Net income (loss) (3.68) 5.01
Average common shares issued and outstanding
Basic 3,511 3,430
Diluted(a) 3,511 3,534
(a) Common equivalent shares have been excluded from the pro forma computation of
diluted loss per share for the year ended December 31, 2008, as the effect would be
antidilutive.
The unaudited pro forma combined financial information is presented
for illustrative purposes only and does not indicate the financial
results of the combined company had the companies actually been
combined as of January 1, 2008, or as of January 1, 2007, nor is it
indicative of the results of operations in future periods. Included in the
unaudited pro forma combined financial information for the years
ended December 31, 2008 and 2007, were pro forma adjustments to
reflect the results of operations of Bear Stearns, and Washington
Mutual’s banking operations, considering the purchase accounting,
valuation and accounting conformity adjustments related to each
transaction. For the Washington Mutual transaction, the amortization
of purchase accounting adjustments to report interest-earning assets
acquired and interest-bearing liabilities assumed at current interest
rates is reflected in all periods presented. Valuation adjustments and
the adjustment to conform allowance methodologies in the
Washington Mutual transaction, and valuation and accounting con-
formity adjustments related to the Bear Stearns merger are reflected
in the results for the years ended December 31, 2008 and 2007.
Internal reorganization related to the Bear Stearns merger
On June 30, 2008, JPMorgan Chase fully and unconditionally guar-
anteed each series of outstanding preferred stock of Bear Stearns, as
well as all of Bear Stearns’ outstanding Securities and Exchange
Commission (“SEC”) registered U.S. debt securities and obligations
relating to trust preferred capital debt securities. Subsequently, on
July 15, 2008, JPMorgan Chase completed an internal merger trans-
action, which resulted in each series of outstanding preferred stock
of Bear Stearns being automatically exchanged into newly issued
shares of JPMorgan Chase preferred stock having substantially iden-
tical terms. Depositary shares, which formerly had represented a one-
fourth interest in a share of Bear Stearns preferred stock, continue to
trade on the New York Stock Exchange but following completion of
this internal merger transaction, represent a one-fourth interest in a
share of JPMorgan Chase preferred stock. In addition, on July 31,
2008, JPMorgan Chase assumed (1) all of Bear Stearns’ then-out-
standing SEC-registered U.S. debt securities; (2) Bear Stearns’ obliga-
tions relating to trust preferred capital debt securities; (3) certain of
Bear Stearns’ then-outstanding foreign debt securities; and (4) cer-
tain of Bear Stearns’ guarantees of then-outstanding foreign debt
securities issued by subsidiaries of Bear Stearns, in each case, in
accordance with the agreements and indentures governing these
securities. JPMorgan Chase also guaranteed Bear Stearns’ obligations
under Bear Stearns’ U.S. $30.0 billion Euro Medium Term Note
Programme and U.S. $4.0 billion Euro Note Issuance Programme.
Other business events
Termination of Chase Paymentech Solutions joint venture
The dissolution of Chase Paymentech Solutions joint venture, a glob-
al payments and merchant acquiring joint venture between
JPMorgan Chase and First Data Corporation, was completed on
November 1, 2008. JPMorgan Chase retained approximately 51% of
the business and will operate the business under the name Chase
Paymentech Solutions. The dissolution of Chase Paymentech