Prudential 2003 Annual Report Download - page 143

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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. EARNINGS PER SHARE (continued)
Company’s methodology for the allocation of such expenses. Cash flows between the Financial Services Businesses
and the Closed Block Business related to administrative expenses are determined by a policy servicing fee arrangement
that is based upon insurance and policies in force and statutory cash premiums. To the extent reported administrative
expenses vary from these cash flow amounts, the differences are recorded, on an after tax basis, as direct equity
adjustments to the equity balances of the businesses. The direct equity adjustments modify the earnings available to
each of the classes of common stock for earnings per share purposes.
Common Stock
A reconciliation of the numerators and denominators of the basic and diluted per share computations is as follows:
2003 2002
December 18, 2001
through December 31, 2001
Income
(in
millions)
Weighted
Average
Shares
Per
Share
Amount
Income
(in
millions)
Weighted
Average
Shares
Per
Share
Amount
Income
(in
millions)
Weighted
Average
Shares
Per
Share
Amount
Basic earnings per share
Income from continuing
operations attributable to the
Financial Services
Businesses .............. $1,069 $754 $ 41
Direct equity adjustment ..... 60 43 —
Income from continuing
operations attributable to the
Financial Services
Businesses available to
holders of Common Stock
after direct equity
adjustment .............. $1,129 544,444,345 $2.07 $797 576,567,377 $1.38 $ 41 580,047,053 $0.07
Effect of dilutive securities
and compensation
programs
Stock options .............. 1,463,747 759,993 780,337
Deferred and long-term
compensation programs .... 1,524,221 655,125 —
Put options ................ — 1,324 —
Equity security units ......... 931,196 — —
Diluted earnings per share
Income from continuing
operations attributable to the
Financial Services
Businesses available to
holders of Common Stock
after direct equity
adjustment .............. $1,129 548,363,509 $2.06 $797 577,983,819 $1.38 $ 41 580,827,390 $0.07
For the years ended December 31, 2003 and 2002, 9,333,483 and 5,349,629 options, respectively, weighted for the
portion of the period they were outstanding, with a weighted average exercise price of $31.66 and $32.97 per share,
respectively, were excluded from the computation of diluted earnings per share because the options, based on
application of the treasury stock method, were antidilutive.
Prudential Financial 2003 Annual Report 141