Prudential 2002 Annual Report Download - page 127
Download and view the complete annual report
Please find page 127 of the 2002 Prudential 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.PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
15. EARNINGS PER SHARE (continued)
Block Business. Accordingly, earnings per share is calculated separately for each of these two classes of common
stock. Earnings per share amounts are based on the earnings available to common stockholders for the periods
subsequent to the date of demutualization.
Net income for the Financial Services Businesses and the Closed Block Business is determined in
accordance with GAAP and includes general and administrative expenses charged to each of the respective
businesses based on the Company’s methodology for the allocation of such expenses. Cash flows between the
Financial Services Businesses and the Closed Block Business related to administrative expenses are determined
by a policy servicing fee arrangement that is based upon insurance and policies in force and statutory cash
premiums. To the extent reported administrative expenses vary from these cash flow amounts, the differences are
recorded, on an after tax basis, as direct equity adjustments to the equity balances of the businesses. The direct
equity adjustments modify the earnings available to each of the classes of common stock for earnings per share
purposes.
Common Stock
A reconciliation of the numerators and denominators of the basic and diluted per share computations is as
follows:
2002
December 18, 2001
through December 31, 2001
Income
(in millions)
Weighted
Average
Shares
Per Share
Amount
Income
(in millions)
Weighted
Average
Shares
Per Share
Amount
Basic earnings per share
Income from continuing operations attributable to the
Financial Services Businesses ...................... $741 $ 40
Direct equity adjustment ............................ 43 —
Income from continuing operations attributable to the
Financial Services Businesses available to holders of
Common Stock after direct equity adjustment ......... $784 576,567,377 $1.36 $ 40 580,047,053 $0.07
Effect of dilutive securities and compensation programs
Stockoptions ..................................... 759,993 780,337
Deferred and long-term compensation programs ......... 655,125 —
Putoptions ....................................... 1,324 —
Diluted earnings per share
Income from continuing operations attributable to the
Financial Services Businesses available to holders of
Common Stock after direct equity adjustment ......... $784 577,983,819 $1.36 $ 40 580,827,390 $0.07
The Company’s equity security units include, as a component, purchase contracts requiring the holders to
purchase shares of Common Stock on November 15, 2004. The purchase contracts are considered in the diluted
earnings per share calculation using the treasury stock method. The purchase contracts will be dilutive to earnings
per share when the average market price of the Common Stock for a particular period is above $34.10.
For the year ended December 31, 2002, 5,349,629 options, weighted for the portion of the period they were
outstanding, with a weighted average exercise price of $32.97 per share, were excluded from the computation of
diluted earnings per share because the options, based on application of the treasury stock method, were
antidilutive.
Growing and Protecting Your Wealth126