Prudential 2005 Annual Report Download - page 129

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
12. EQUITY SECURITY UNITS
In December 2001, in connection with the demutualization, Prudential Financial and Prudential Financial Capital Trust I (the
“Trust”) co-issued 13,800,000 6.75% equity security units (the “Units”) to the public at an offering price of $50 per Unit for gross
proceeds of $690 million. Each Unit had a stated amount of $50 and initially consisted of (1) a contract requiring the holder to
purchase, for $50, shares of Common Stock of Prudential Financial by November 15, 2004 (the “purchase contract”), at a price
determined by a formula described in the purchase contract and (2) a redeemable capital security of the Trust, with a stated
liquidation amount of $50.
In accordance with the terms of the Units, the Trust was dissolved on July 29, 2004, and $690 million aggregate principal
amount of 5.34% debentures of Prudential Financial maturing on November 15, 2006 (the “Debentures”), the sole assets of the
Trust, were distributed to the owners of the Trust’s capital securities in exchange for their capital securities. The Debentures were
remarketed on behalf of the debenture owners on August 6, 2004 and the interest rate on the Debentures was reset as of August 11,
2004 to 4.104% per annum. As of December 31, 2005 and 2004 the $690 million of 4.104% Debentures are reported as “Short-term
debt” and “Long-term debt,” respectively.
In November 2004, the Company settled the purchase contracts associated with the Units by issuing 20.3 million new shares of
Common Stock (based on 1.47 shares of Common Stock per purchase contract) for proceeds of $690 million.
13. STOCKHOLDERS’ EQUITY
The Company has outstanding two classes of common stock: the Common Stock and the Class B Stock. The changes in the
number of shares issued, held in treasury and outstanding are as follows for the periods indicated:
Common Stock Class B Stock
Issued
Held In
Treasury Outstanding
Issued and
Outstanding
(in millions)
Balance, December 31, 2002 ........................................................ 584.5 24.3 560.2 2.0
Common Stock issued(1) ............................................................ 0.1 — 0.1 —
Common Stock acquired ............................................................ — 29.1 (29.1) —
Stock-based compensation programs(2) ................................................ — (2.0) 2.0 —
Balance, December 31, 2003 ........................................................ 584.6 51.4 533.2 2.0
Common Stock issued(3) ............................................................ 20.3 — 20.3 —
Common Stock acquired ............................................................ — 32.5 (32.5) —
Stock-based compensation programs(2) ................................................ — (3.6) 3.6 —
Balance, December 31, 2004 ........................................................ 604.9 80.3 524.6 2.0
Common Stock issued .............................................................. — — — —
Common Stock acquired ............................................................ — 32.4 (32.4) —
Stock-based compensation programs(2) ................................................ — (5.3) 5.3 —
Balance, December 31, 2005 ........................................................ 604.9 107.4 497.5 2.0
(1) Represents distributions of shares of Common Stock to eligible policyholders.
(2) Represents net shares issued from Treasury pursuant to the Company’s stock-based compensation program.
(3) Represents shares of Common Stock issued in 2004 to settle the purchase contracts associated with the Company’s equity security units.
Common Stock and Class B Stock
On the date of demutualization, Prudential Financial completed an initial public offering of its Common Stock at an initial
public offering price of $27.50 per share. The shares of Common Stock issued were in addition to shares of Common Stock the
Company distributed to policyholders as part of the demutualization. The Common Stock is traded on the New York Stock
Exchange under the symbol “PRU.” Also on the date of demutualization, Prudential Financial completed the sale, through a private
placement, of 2.0 million shares of Class B Stock at a price of $87.50 per share. The Class B Stock is a separate class of common
stock which is not publicly traded. The Common Stock reflects the performance of the Financial Services Businesses and the Class
B Stock reflects the performance of the Closed Block Business.
Prudential Financial 2005 Annual Report 127