Fannie Mae 2001 Annual Report Download - page 61

{ 59 } Fannie Mae 2001 Annual Report
Fannie Mae’s effective tax rates differed from statutory
federal rates for the years ended December 31, 2001, 2000,
and 1999 as follows:
2001 2000 1999
Statutory corporate rate . . . . . . . . . . . . . . . 35% 35% 35%
Tax-exempt interest and dividends
received deductions . . . . . . . . . . . . . . . (4) (5) (4)
Equity investments in affordable
housing projects . . . . . . . . . . . . . . . . . . (4) (4) (3)
Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . 27% 26% 28%
Fannie Mae is exempt from state and local taxes, except for
real estate taxes.
7. Earnings per Common Share
The following table sets forth the computation of basic and
diluted earnings per common share.
Year Ended December 31,
2001 2000 1999
Dollars and shares in millions, except per share amounts Basic Diluted Basic Diluted Basic Diluted
Net income before extraordinary item and cumulative
effect of change in accounting principle . . . . . . . . . . . . . . . . . . $6,067 $6,067 $4,416 $4,416 $3,921 $3,921
Extraordinary (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (341) (341) 32 32 (9) (9)
Cumulative effect of change in accounting principle . . . . . . . . . . 168 168 —— ——
Preferred stock dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (138) (138) (121) (121) (78) (78)
Net income available to common stockholders . . . . . . . . . . . . . . . $5,756 $5,756 $4,327 $4,327 $3,834 $3,834
Weighted average common shares . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000 1,003 1,003 1,024 1,024
Dilutive potential common shares1 . . . . . . . . . . . . . . . . . . . . . . . . . —6 —6 —7
Average number of common shares outstanding
used to calculate earnings per common share . . . . . . . . . . . . . 1,000 1,006 1,003 1,009 1,024 1,031
Earnings per common share before extraordinary item and
cumulative effect of change in accounting principle . . . . . . . $5.92 $ 5.89 $4.28 $ 4.26 $ 3.75 $ 3.73
Extraordinary (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (.34) (.34) .03 .03 — (.01)
Cumulative effect of change in accounting principle . . . . . . . . . . .17 .17 —— ——
Net earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5.75 $ 5.72 $4.31 $ 4.29 $ 3.75 $ 3.72
1Dilutive potential common shares consist primarily of the dilutive effect from employee stock options and other stock compensation plans.
For additional disclosures regarding Fannie Mae’s stock
compensation plans and the outstanding preferred stock,
refer to Notes 8 and 12, respectively.
8. Stock Compensation Plans
At December 31, 2001, Fannie Mae had five stock-based
compensation plans, which are described below. Financial
Accounting Standard No. 123 (FAS 123), Accounting for
Stock-Based Compensation, gives companies the option of
either recording an expense for all stock compensation
awards based on the fair value at grant date or continuing
to follow Accounting Principles Board Opinion No. 25
(APB Opinion 25) with the additional requirement that they
disclose, in a footnote, pro forma net income and earnings
per share as if they had adopted the expense recognition
provisions of FAS 123. Fannie Mae elected to apply APB
Opinion 25 and related interpretations in accounting for its
plans. Thus, no compensation expense has been recognized
for the nonqualified stock options and Employee Stock
Purchase Plan. Fannie Mae’s reported net income and
reported diluted earnings per common share were $5.894
billion and $5.72, $4.448 billion and $4.29, and $3.912
billion and $3.72 for the years ended December 31, 2001,
2000, and 1999, respectively. If compensation expense had
been recognized for benefits under all five plans, based on
their fair value at grant date and consistent with FAS 123,
Fannie Mae’s net income, net income available to common
stockholders, and diluted earnings per common share would
have been $5.653 billion, $5.515 billion, and $5.62;
$4.187 billion, $4.066 billion, and $4.15; and $3.840 billion,
$3.762 billion, and $3.65 for the years ended
December 31, 2001, 2000, and 1999, respectively.
Fannie Mae determined the fair value of benefits under its
stock-based plans using a Black-Scholes pricing model.