Goldman Sachs 2012 Annual Report Download - page 75

Management’s Discussion and Analysis
Equity Capital Management
Our objective is to maintain a sufficient level and optimal
composition of equity capital. We principally manage our
capital through issuances and repurchases of our common
stock. We may also, from time to time, issue or repurchase
our preferred stock, junior subordinated debt issued to
trusts and other subordinated debt or other forms of capital
as business conditions warrant and subject to approval of
the Federal Reserve Board. We manage our capital
requirements principally by setting limits on balance sheet
assets and/or limits on risk, in each case both at the
consolidated and business levels. We attribute capital usage
to each of our businesses based upon our internal
risk-based capital and regulatory frameworks and manage
the levels of usage based upon the balance sheet and risk
limits established.
See Notes 16 and 19 to the consolidated financial
statements for further information about our preferred
stock, junior subordinated debt issued to trusts and other
subordinated debt.
Berkshire Hathaway Warrant. In October 2008, we
issued Berkshire Hathaway a warrant, which grants
Berkshire Hathaway the option to purchase up to
43.5 million shares of common stock at an exercise price of
$115.00 per share on or before October 1, 2013. See
Note 19 to the consolidated financial statements for
information about the Series G Preferred Stock.
Share Repurchase Program. We seek to use our share
repurchase program to help maintain the appropriate level
of common equity. The repurchase program is effected
primarily through regular open-market purchases, the
amounts and timing of which are determined primarily by
our current and projected capital positions (i.e.,
comparisons of our desired level and composition of capital
to our actual level and composition of capital), but which
may also be influenced by general market conditions and
the prevailing price and trading volumes of our
common stock.
As of December 2012, under the share repurchase program
approved by the Board of Directors of Group Inc. (Board),
we can repurchase up to 21.5 million additional shares of
common stock; however, any such repurchases are subject
to the approval of the Federal Reserve Board. See “Market
for Registrant’s Common Equity, Related Stockholder
Matters and Issuer Purchases of Equity Securities” in
Part II, Item 5 of our Annual Report on Form 10-K and
Note 19 to the consolidated financial statements for
additional information on our repurchase program and see
above for information about the annual CCAR.
Other Capital Metrics
The table below presents information on our shareholders’
equity and book value per common share.
As of December
in millions, except per share amounts 2012 2011
Total shareholders’ equity $75,716 $70,379
Common shareholders’ equity 69,516 67,279
Tangible common shareholders’ equity 64,417 61,811
Book value per common share 144.67 130.31
Tangible book value per common share 134.06 119.72
Tangible common shareholders’ equity. Tangible
common shareholders’ equity equals total shareholders’
equity less preferred stock, goodwill and identifiable
intangible assets. We believe that tangible common
shareholders’ equity is meaningful because it is a measure
that we and investors use to assess capital adequacy.
Tangible common shareholders’ equity is a non-GAAP
measure and may not be comparable to similar non-GAAP
measures used by other companies.
The table below presents the reconciliation of total
shareholders’ equity to tangible common
shareholders’ equity.
As of December
in millions 2012 2011
Total shareholders’ equity $75,716 $70,379
Deduct: Preferred stock (6,200) (3,100)
Common shareholders’ equity 69,516 67,279
Deduct: Goodwill and identifiable
intangible assets (5,099) (5,468)
Tangible common shareholders’ equity $64,417 $61,811
Book value and tangible book value per common
share. Book value and tangible book value per common
share are based on common shares outstanding, including
restricted stock units granted to employees with no future
service requirements, of 480.5 million and 516.3 million as
of December 2012 and December 2011, respectively. We
believe that tangible book value per common share
(tangible common shareholders’ equity divided by common
shares outstanding) is meaningful because it is a measure
that we and investors use to assess capital adequacy.
Tangible book value per common share is a non-GAAP
measure and may not be comparable to similar non-GAAP
measures used by other companies.
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