JP Morgan Chase 2008 Annual Report Download - page 209

JPMorgan Chase & Co./ 2008 Annual Report 207
During the year ended December 31, 2008, the Firm did not repur-
chase any shares of common stock. During 2007 and 2006, the Firm
repurchased 168 million shares and 91 million shares, respectively, of
common stock under stock repurchase programs approved by the
Board of Directors.
The Board of Directors approved in April 2007, a stock repurchase
program that authorizes the repurchase of up to $10.0 billion of the
Firm’s common shares, which superseded an $8.0 billion stock repur-
chase program approved in 2006. The $10.0 billion authorization
includes shares to be repurchased to offset issuances under the
Firm’s employee stock-based plans. The actual number of shares that
may be repurchased is subject to various factors, including market
conditions; legal considerations affecting the amount and timing of
repurchase activity; the Firm’s capital position (taking into account
goodwill and intangibles); internal capital generation; and alternative
potential investment opportunities. The repurchase program does not
include specific price targets or timetables; may be executed through
open market purchases or privately negotiated transactions, or utiliz-
ing Rule 10b5-1 programs; and may be suspended at any time. A
Rule 10b5-1 repurchase plan allows the Firm to repurchase shares
during periods when it would not otherwise be repurchasing com-
mon stock – for example, during internal trading “black-out peri-
ods.” All purchases under a Rule 10b5-1 plan must be made accord-
ing to a predefined plan that is established when the Firm is not
aware of material nonpublic information.
For a discussion of restrictions on the Firm’s ability to repurchase the
Firm’s common stock, see Note 24 above.
As of December 31, 2008, approximately 524 million unissued
shares of common stock were reserved for issuance under various
employee incentive, compensation, option and stock purchase plans,
director compensation plans and the Warrant issued to the U.S.
Treasury under the Capital Purchase Program as discussed above.
Note 26 – Earnings per share
SFAS 128 requires the presentation of basic and diluted earnings per
share (“EPS”) in the Consolidated Statements 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 computed using the same method for the
numerator as basic EPS but, in the denominator, the number of com-
mon 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 applicable to common
stock were necessary. The following table presents the calculation of
basic and diluted EPS for 2008, 2007 and 2006.
Year ended December 31,
(in millions, except per share amounts) 2008 2007 2006
Basic earnings per share
Income from continuing operations $ 3,699 $ 15,365 $13,649
Income from discontinued operations —— 795
Income before extraordinary gain $ 3,699 $ 15,365 $14,444
Extraordinary gain 1,906 ——
Net income 5,605 15,365 14,444
Less: preferred stock dividends 674 —4
Net income applicable to
common stock $ 4,931 $ 15,365 $14,440
Weighted-average basic
shares outstanding 3,501 3,404 3,470
Income from continuing
operations per share $ 0.86 $ 4.51 $ 3.93
Discontinued operations per share —— 0.23
Extraordinary gain per share 0.55 ——
Net income per share $ 1.41 $ 4.51 $ 4.16
Year ended December 31,
(in millions, except per share amounts) 2008 2007 2006
Diluted earnings per share
Net income applicable to
common stock $ 4,931 $ 15,365 $14,440
Weighted-average basic
shares outstanding 3,501 3,404 3,470
Add: Employee restricted stock,
RSUs, stock options and SARs 104 104 104
Weighted-average diluted
shares outstanding(a) 3,605 3,508 3,574
Income from continuing
operations per share $ 0.84 $ 4.38 $ 3.82
Discontinued operations per share —— 0.22
Extraordinary gain per share 0.53 ——
Net income per share $ 1.37 $ 4.38 $ 4.04
(a) Options issued under employee benefit plans and, in 2008, the warrant issued under
the U.S.Treasury’s Capital Purchase Program to purchase an aggregate 209 million,
129 million and 150 million shares of common stock were outstanding for the years
ended December 31, 2008, 2007 and 2006, respectively, but were not included in
the computation of diluted EPS, because the options and warrant were antidilutive.