Prudential 2001 Annual Report Download - page 133

Prudential Financial, Inc.
Notes to Consolidated Financial Statements
14. Earnings Per Share (continued)
A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows:
December 18, 2001 through December 31, 2001
Income
(In Millions) Shares Per Share Amount
Basic earnings per share
Net income attributable to the Financial Services Businesses available to holders of
Common Stock ......................................................... $38 580,047,053 $0.07
Effect of dilutive securities
Stock options ............................................................. 780,337
Diluted earnings per share
Net income attributable to the Financial Services Businesses available to holders of
Common Stock ......................................................... $38 580,827,390 $0.07
Class B Stock
The income attributable to the Closed Block Business and available to holders of Class B Stock for the period
December 18, 2001 through December 31, 2001 amounted to $3 million. The weighted average number of shares of
Class B Stock used in the calculation of basic earnings per share amounted to 2,000,000 shares. Diluted earnings per
share is not presented as there are no potentially dilutive shares associated with the Class B Stock.
15. Stock Options
The Company’s Board of Directors adopted the Prudential Financial, Inc. Stock Option Plan (the “Plan”).
Nonqualified Stock Options and Incentive Stock Options as well as Stock Appreciation Rights (“SARs”) are eligible
for grant under the plan. Participants can be employees and non-employees (i.e., statutory agents who perform
services for the Company and participating subsidiaries). The Company made one type of grant, the Associates
Grant, in 2001. The Associates Grant is a broad based award, which granted 240 options per full-time participant
and 120 options per part-time participant. Each option has an exercise price no less than the fair market value of the
Company’s stock on the date the option is granted. The options have a maximum term of 10 years. Generally, one
third of the option grant vests in each of the first three years; accordingly, options granted in 2001 generally will
become eligible for exercise in years 2002 through 2004. A total of 12,322,009 shares have been authorized for
grant under the Associates Grant. A total of 30,805,024 shares are available for the general grant of Options and
SARs under the Plan. There were no options granted or outstanding relating to the general grant of Options and
SARs at December 31, 2001.
The Company has elected to apply Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to
Employees” and related interpretations in accounting for its employee stock options. If the Company had elected to
account for its stock options under the fair value method of SFAS No. 123 “Accounting for Stock Based
Compensation,” the Company’s net income and earnings per common share would have been reduced to the pro-
forma amounts indicated below:
Employee Stock Option Grants
2001
(In Millions)
(Except Per Share Data)
Financial
Services
Businesses
Closed
Block
Business
Net Income
As reported ............................................................................... $ 38 $ 3
Pro forma ................................................................................. 37 3
Basic EPS
As reported ............................................................................... $0.07 $1.50
Pro forma ................................................................................. 0.06 1.50
Diluted EPS
As reported ............................................................................... $0.07 $1.50
Pro forma ................................................................................. 0.06 1.50
Prudential Financial 2001 Annual Report 131