Sallie Mae 2008 Annual Report Download - page 187

12. Earnings (Loss) per Common Share
Basic earnings (loss) per common share (“EPS”) are calculated using the weighted average number of
shares of common stock outstanding during each period. A reconciliation of the numerators and denominators
of the basic and diluted EPS calculations follows for the years ended December 31, 2008, 2007 and 2006.
2008 2007 2006
Years Ended December 31
Numerator:
Net income (loss) attributable to common stock . . . . . . . . . . . . . . . . . . $(323,832) $(933,539) $1,121,389
Adjusted for dividends of convertible preferred stock series C
(1)
...... — — —
Adjusted for debt expense of convertible debentures (“Co-Cos”), net of
taxes
(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 67,274
Adjusted for non-taxable unrealized gains on equity forwards
(3)
. . . . . . . — — (3,528)
Net income (loss) attributable to common stock, adjusted . . . . . . . . . . . $(323,832) $(933,539) $1,185,135
Denominator (shares in thousands):
Weighted average shares used to compute basic EPS . . . . . . . . . . . . . . 466,642 412,233 410,805
Effect of dilutive securities:
Dilutive effect of convertible preferred stock series C . . . . . . . . . . . . — — —
Dilutive effect of Co-Cos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 30,312
Dilutive effect of stock options, non-vested deferred compensation,
non-vested restricted stock, restricted stock units, Employee Stock
Purchase Plan (“ESPP”) and equity forwards
(4)
. . . . . . . . . . . . . . . — — 10,053
Dilutive potential common shares
(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . — — 40,365
Weighted average shares used to compute diluted EPS . . . . . . . . . . . . . 466,642 412,233 451,170
Net earnings (loss) per share:
Basic earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . . . $ (.69) $ (2.26) $ 2.73
Dilutive effect of convertible preferred stock series C . . . . . . . . . . . . — — —
Dilutive effect of Co-Cos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (.03)
Dilutive effect of equity forwards . . . . . . . . . . . . . . . . . . . . . . . . . . — — (.01)
Dilutive effect of stock options, non-vested deferred compensation,
non-vested restricted stock, restricted stock units, and ESPP . . . . . . — — (.06)
Diluted earnings (loss) per common share . . . . . . . . . . . . . . . . . . . . . . $ (.69) $ (2.26) $ 2.63
(1)
The Company’s 7.25 percent mandatory convertible preferred stock series C was issued on December 31, 2007. The mandatory
convertible preferred stock will automatically convert on December 15, 2010, into between 48 million and 59 million shares of
common stock, depending upon the Company’s stock price at that time.
(2)
Emerging Issues Task Force (“EITF”) Issue No. 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,”
requires the shares underlying Co-Cos to be included in diluted EPS computations regardless of whether the market price trigger or
the conversion price has been met, using the “if-converted” method. These Co-Cos were called at par on July 25, 2007.
(3)
SFAS No. 128, “Earnings per Share,” and the additional guidance provided by EITF Topic No. D-72, “Effect of Contracts That
May Be Settled in Stock or Cash on the Computation of Diluted Earnings per Share,” require both the denominator and the
numerator to be adjusted in calculating the potential impact of the Company’s equity forward contracts on diluted EPS. Under
this guidance, when certain conditions are satisfied, the impact can be dilutive when (1) the average price during the period is
lower than the respective strike prices on the Company’s equity forward contracts, and (2) the Company recorded an unrealized
gain or loss on derivative and hedging activities related to its equity forward contracts.
(4)
Includes the potential dilutive effect of additional common shares that are issuable upon exercise of outstanding stock options,
non-vested deferred compensation, non-vested restricted stock, restricted stock units, and the outstanding commitment to issue
shares under the ESPP, determined by the treasury stock method, and equity forward contracts determined by the reverse treasury
stock method. The Company settled all of its outstanding equity forward contracts in January 2008.
(5)
For the years ended December 31, 2008 and 2007, stock options covering approximately 38 million and 37 million shares,
respectively, were outstanding but not included in the computation of diluted earnings per share because they were anti-dilutive
due to the Company’s net loss. For the year ended December 31, 2006, stock options and equity forwards covering approxi-
mately 57 million shares were outstanding but not included in the computation of diluted earnings per share because they were
anti-dilutive.
F-67
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)