JP Morgan Chase 2006 Annual Report Download - page 128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JPMorgan Chase & Co.
126 JPMorgan Chase & Co. / 2006 Annual Report
Note 21 – Common stock
At December 31, 2006, JPMorgan Chase was authorized to issue 9.0 billion
shares of common stock with a $1 par value per share. Common shares issued
(newly issued or distributed from treasury) by JPMorgan Chase during 2006,
2005 and 2004 were as follows:
December 31, (in millions) 2006 2005 2004(b)
Issued – balance at January 1 3,618.2 3,584.8 2,044.4
Newly issued:
Employee benefits and
compensation plans 39.3 34.0 69.0
Employee stock purchase plans 0.6 1.4 3.1
Purchase accounting acquisitions
and other —— 1,469.4
Total newly issued 39.9 35.4 1,541.5
Cancelled shares (0.3) (2.0) (1.1)
Total issued – balance at December 31 3,657.8 3,618.2 3,584.8
Treasury – balance at January 1 (131.5) (28.6) (1.8)
Purchase of treasury stock (90.7) (93.5) (19.3)
Share repurchases related to employee
stock-based awards(a) (8.8) (9.4) (7.5)
Issued from treasury:
Employee benefits and
compensation plans 34.4 ——
Employee stock purchase plans 0.5 ——
Total issued from treasury 34.9 ——
Total treasury – balance at December 31 (196.1) (131.5) (28.6)
Outstanding 3,461.7 3,486.7 3,556.2
(a) Participants in the Firm’s stock-based incentive plans may have shares withheld to cover
income taxes. The shares withheld amounted to 8.1 million, 8.2 million and 5.7 million for
2006, 2005 and 2004, respectively.
(b) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results.
During 2006, 2005 and 2004, the Firm repurchased 91 million shares, 94 mil-
lion shares and 19 million shares, respectively, of common stock under stock
repurchase programs approved by the Board of Directors.
As of December 31, 2006, approximately 464 million unissued shares of
common stock were reserved for issuance under various employee or director
incentive, compensation, option and stock purchase plans.
Note 22 – Earnings per share
SFAS 128 requires the presentation of basic and diluted earnings per share
(“EPS”) in the Consolidated statement of income. 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 comput-
ed 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 2006, 2005 and
2004:
Year ended December 31,
(in millions, except per share amounts) 2006 2005 2004(b)
Basic earnings per share
Income from continuing operations $ 13,649 $ 8,254 $ 4,260
Discontinued operations 795 229 206
Net income 14,444 8,483 4,466
Less: preferred stock dividends 413 52
Net income applicable to
common stock $ 14,440 $ 8,470 $ 4,414
Weighted-average basic
shares outstanding 3,470.1 3,491.7 2,779.9
Income from continuing operations
per share $ 3.93 $ 2.36 $ 1.51
Discontinued operations per share 0.23 0.07 0.08
Net income per share $ 4.16 $ 2.43 $ 1.59
Diluted earnings per share
Net income applicable to
common stock $ 14,440 $ 8,470 $ 4,414
Weighted-average basic
shares outstanding 3,470.1 3,491.7 2,779.9
Add: Employee restricted stock,
RSUs, stock options and SARs 103.8 65.6 70.7
Weighted-average diluted
shares outstanding(a) 3,573.9 3,557.3 2,850.6
Income from continuing operations
per share $ 3.82 $ 2.32 $ 1.48
Discontinued operations per share 0.22 0.06 0.07
Net income per share $ 4.04 $ 2.38 $ 1.55
(a) Options issued under employee stock-based incentive plans to purchase 150 million, 280
million and 300 million shares of common stock were outstanding for the years ended
2006, 2005 and 2004, respectively, but were not included in the computation of diluted
EPS because the options were antidilutive.
(b) 2004 results include six months of the combined Firm’s results and six months of heritage
JPMorgan Chase results.
The following is a summary of JPMorgan Chase’s preferred stock outstanding as of December 31:
Stated value and Rate in effect at
(in millions, except redemption Shares Outstanding at December 31, Earliest December 31,
per share amounts and rates) price per share(b) 2006 2005 2006 2005 redemption date 2006
6.63% Series H cumulative(a) $ 500.00 —0.28 $— $ 139 NA NA
Total preferred stock —0.28 $— $ 139
(a) Represented by depositary shares.
(b) Redemption price includes amount shown in the table plus any accrued but unpaid dividends.