JP Morgan Chase 2010 Annual Report Download - page 269

JPMorgan Chase & Co./2010 Annual Report
269
Note 25 – Earnings per share
Effective January 1, 2009, the Firm implemented accounting guid-
ance for participating securities, which clarifies that unvested stock-
based compensation awards containing nonforfeitable rights to
dividends or dividend equivalents (collectively, “dividends”) are
participating securities and should be included in the earnings per
share (“EPS”) calculation using the two-class method. Under the
two-class method, all earnings (distributed and undistributed) are
allocated to each class of common stock and participating securi-
ties, based on their respective rights to receive dividends. JPMorgan
Chase grants restricted stock and RSUs to certain employees under
its stock-based compensation programs, which entitle the recipients
to receive nonforfeitable dividends during the vesting period on a
basis equivalent to the dividends paid to holders of common stock;
these unvested awards meet the definition of participating securi-
ties. EPS data for the prior periods were revised as required by the
accounting guidance. Options issued under employee benefit plans
that have an antidilutive effect are excluded from the computation
of diluted EPS.
The following table presents the calculation of basic and diluted
EPS for the years ended December 31, 2010, 2009 and 2008.
Year ended December 31,
(in millions, except per share
amounts)
2010 2009 2008
Basic earnings per share
Income before extraordinary gain
$
17,370
$ 11,652 $ 3,699
Extraordinary gain
—
76 1,906
Net income
17,
3
7
0
11,728 5,605
Less: Preferred stock dividends
642
1,327 674
Less: Accelerated amortization
from redemption of preferred
stock issued to the U.S. Treasury
— 1,112(c) —
Net income applicable to
common equity 16,728 9,289(c)
4,931
Less: Dividends and undistri
b
uted
earnings allocated to participat-
ing securities
964 515 189
Net income applicable to
common stockholders $ 15,764 $ 8,774 $ 4,742
Total weighted
-
average basic
shares outstanding 3,956.3 3,862.8 3,501.1
Per share
Income before extraordinary gain
$ 3.98 $ 2.25
(c)
$ 0.81
Extraordinary gain
—
0.02 0.54
Net income $ 3.98 $ 2.27
(
c
)
$ 1.35
Year ended December 31,
(in millions, except per share
amounts) 2010 2009 2008
Diluted earnings per share
Net income applicable to
common stockholders $ 15,764 $ 8,774 $ 4,742
Total weighted
-
average basic
shares outstanding 3,956.3 3,862.8 3,501.1
Add: Em
ployee stock options, SARs
and warrants(a) 20.6 16.9 20.7
Total weighted
-
average
diluted shares outstanding(b) 3,976.9 3,879.7 3,521.8
Per share
Income before extraordinary gain $ 3.96 $ 2.24
(c)
$ 0.81
Extraordinary gain
—
0.02 0.54
Net income per share $ 3.96 $ 2.26
(
c
)
$ 1.35
(a) Excluded from the computation of diluted EPS (due to their antidilutive
effect) were options issued under employee benefit plans and the warrants
originally issued in 2008 under the U.S. Treasury’s Capital Purchase Pro-
gram to purchase shares of the Firm’s common stock aggregating 233 mil-
lion, 266 million and 209 million for the full years ended December 31,
2010, 2009 and 2008, respectively.
(b) Participating securities were included in the calculation of diluted EPS using
the two-class method, as this computation was more dilutive than the cal-
culation using the treasury stock method.
(c) The calculation of basic and diluted EPS and net income applicable to
common equity for full year 2009 includes a one-time, noncash reduction of
$1.1 billion, or $0.27 per share, resulting from repayment of the U.S. Trou-
bled Asset Relief Program (“TARP”) preferred capital.