JP Morgan Chase 2005 Annual Report Download - page 121

JPMorgan Chase & Co. /2005 Annual Report 119
Note 19 – Common stock
At December 31, 2005, JPMorgan Chase was authorized to issue 9.0 billion
shares of common stock with a $1 par value per share. In connection with the
Merger, the shareholders approved an increase in the amount of authorized
shares of 4.5 billion from the 4.5 billion that had been authorized as of
December 31, 2003. Common shares issued (newly issued or distributed from
treasury) by JPMorgan Chase during 2005, 2004 and 2003 were as follows:
December 31,(a) (in millions) 2005 2004 2003
Issued – balance at January 1 3,584.8 2,044.4 2,023.6
Newly issued:
Employee benefits and
compensation plans 34.0 69.0 20.9
Employee stock purchase plans 1.4 3.1 0.7
Purchase accounting acquisitions
and other —1,469.4 —
Total newly issued 35.4 1,541.5 21.6
Cancelled shares (2.0) (1.1) (0.8)
Total issued – balance at December 31 3,618.2 3,584.8 2,044.4
Treasury – balance at January 1 (28.6) (1.8) (24.9)
Purchase of treasury stock (93.5) (19.3) —
Share repurchases related to employee
stock-based awards(b) (9.4) (7.5) (3.0)
Issued from treasury:
Employee benefits and
compensation plans —— 25.8
Employee stock purchase plans —— 0.3
Total issued from treasury —— 26.1
Total treasury – balance at December 31 (131.5) (28.6) (1.8)
Outstanding 3,486.7 3,556.2 2,042.6
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
(b) Participants in the Firm’s stock-based incentive plans may have shares withheld to cover
income taxes.The shares withheld amounted to 8.2 million, 5.7 million and 2.3 million for
2005, 2004 and 2003, respectively.
During 2005 and 2004, the Firm repurchased 93.5 million shares and
19.3 million shares, respectively, of common stock under a stock repurchase
program that was approved by the Board of Directors on July 20, 2004. The
Firm did not repurchase shares of its common stock during 2003 under a
prior stock repurchase program.
As of December 31, 2005, approximately 507 million unissued shares of
common stock were reserved for issuance under various employee or director
incentive, compensation, option and stock purchase plans.
Note 20 – Earnings per share
SFAS 128 requires the presentation of basic and diluted earnings per share
(“EPS”) in the income statement. Basic EPS is computed by dividing net
income applicable to common stock by the weighted-average number of
common shares outstanding for the period. Diluted EPS is computed using the
same method as basic EPS but, in the denominator, the number of common
shares reflect, in addition to outstanding shares, the potential dilution that
could occur if convertible securities or other contracts to issue common stock
were converted or exercised into common stock. Net income available for
common stock is the same for basic EPS and diluted EPS, as JPMorgan Chase
had no convertible securities, and therefore, no adjustments to net income
available for common stock were necessary. The following table presents the
calculation of basic and diluted EPS for 2005, 2004 and 2003:
Year ended December 31,
(in millions, except per share amounts)
(a) 2005 2004 2003
Basic earnings per share
Net income $ 8,483 $ 4,466 $ 6,719
Less: preferred stock dividends 13 52 51
Net income applicable to
common stock $ 8,470 $ 4,414 $ 6,668
Weighted-average basic
shares outstanding 3,491.7 2,779.9 2,008.6
Net income per share $ 2.43 $ 1.59 $ 3.32
Diluted earnings per share
Net income applicable to
common stock $ 8,470 $ 4,414 $ 6,668
Weighted-average basic
shares outstanding 3,491.7 2,779.9 2,008.6
Add: Broad-based options 3.6 5.4 4.1
Restricted stock, restricted stock
units and key employee options 62.0 65.3 42.4
Weighted-average diluted
shares outstanding 3,557.3 2,850.6 2,055.1
Net income per share(b) $ 2.38 $ 1.55 $ 3.24
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
(b) Options issued under employee benefit plans to purchase 280 million, 300 million and
335 million shares of common stock were outstanding for the years ended 2005, 2004 and
2003, respectively, but were not included in the computation of diluted EPS because the
options’ exercise prices were greater than the average market price of the common shares.
Note 21 – Accumulated other
comprehensive income (loss)
Accumulated other comprehensive income (loss) includes the after-tax change
in unrealized gains and losses on AFS securities, cash flow hedging activities
and foreign currency translation adjustments (including the impact of related
derivatives).
Accumulated
Year ended Unrealized Cash other
December 31,(a) gains (losses) Translation flow comprehensive
(in millions) on AFS securities(b) adjustments hedges income (loss)
Balance at
December 31, 2002 $ 731 $ (6) $ 502 $ 1,227
Net change (712) — (545) (1,257)
Balance at
December 31, 2003 19 (6) (43) (30)
Net change (80)(c) (2)(d) (96) (178)
Balance at
December 31, 2004 (61) (8) (139) (208)
Net change (163)(e) —(f) (255) (418)
Balance at
December 31, 2005 $ (224) $ (8) $ (394) $ (626)
(a) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results. 2003 reflects the results of heritage JPMorgan Chase only.
(b) Represents the after-tax difference between the fair value and amortized cost of the AFS
securities portfolio and retained interests in securitizations recorded in Other assets.
(c) The net change during 2004 was due primarily to rising interest rates and recognition of
unrealized gains through securities sales.
(d) Includes $280 million of after-tax gains (losses) on foreign currency translation from opera-
tions for which the functional currency is other than the U.S. dollar offset by $(282) million
of after-tax gains (losses) on hedges.
(e) The net change during 2005 was due primarily to higher interest rates, partially offset by
the reversal of unrealized losses through securities sales.
(f) Includes $(351) million of after-tax gains (losses) on foreign currency translation from oper-
ations for which the functional currency is other than the U.S. dollar offset by $351 million
of after-tax gains (losses) on hedges.