Prudential 2005 Annual Report Download - page 130

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
13. STOCKHOLDERS’ EQUITY (continued)
Holders of Common Stock have no interest in a separate legal entity representing the Financial Services Businesses and
holders of the Class B Stock have no interest in a separate legal entity representing the Closed Block Business and holders of each
class of common stock are subject to all of the risks associated with an investment in the Company.
In the event of a liquidation, dissolution or winding-up of the Company, holders of Common Stock and holders of Class B
Stock would be entitled to receive a proportionate share of the net assets of the Company that remain after paying all liabilities and
the liquidation preferences of any preferred stock.
Common Stock Held in Treasury
Common Stock held in treasury is accounted for at average cost. Gains resulting from the reissuance of “Common Stock held
in treasury” are credited to “Additional paid-in capital.” Losses resulting from the reissuance of “Common Stock held in treasury”
are charged first to “Additional paid-in capital” to the extent the Company has previously recorded gains on treasury share
transactions, then to “Retained earnings.”
In March 2003, Prudential Financial’s Board of Directors authorized the Company to purchase up to an additional $1 billion of
its outstanding Common Stock. During 2003, the Company acquired 29,076,809 shares of its outstanding Common Stock at a total
cost of $1.0 billion.
In March 2004, Prudential Financial’s Board of Directors authorized the Company to purchase up to $1.5 billion of its
outstanding Common Stock in 2004. During 2004, the Company acquired 32,455,600 shares of its outstanding Common Stock at a
total cost of $1.5 billion.
In November 2004, Prudential Financial’s Board of Directors authorized a stock repurchase program under which the
Company was authorized to purchase up to $1.5 billion of its outstanding Common Stock in 2005. In June 2005, Prudential
Financial’s Board of Directors authorized an increase in the annual rate of share repurchases from $1.5 billion to $2.1 billion for
calendar year 2005. During 2005, the Company acquired 32,447,200 shares of its outstanding Common Stock at a total cost of $2.1
billion.
In November 2005, Prudential Financial’s Board of Directors authorized the Company to repurchase up to $2.5 billion of its
outstanding Common Stock in calendar year 2006. The timing and amount of any repurchases under this authorization are
determined by management based upon market conditions and other considerations, and the repurchases may be effected in the
open market or through negotiated transactions. The 2006 stock repurchase program supersedes all previous repurchase programs.
Stock Conversion Rights of the Class B Stock
Prudential Financial may, at its option, at any time, exchange all outstanding shares of Class B Stock into such number of
shares of Common Stock as have an aggregate average market value equal to 120% of the appraised fair market value of the
outstanding shares of Class B Stock.
Holders of Class B Stock will be permitted to convert their shares of Class B Stock into such number of shares of Common
Stock as have an aggregate average market value equal to 100% of the appraised fair market value of the outstanding shares of
Class B Stock (1) in the holder’s sole discretion, in the year 2016 or at any time thereafter, and (2) at any time in the event that
(a) the Class B Stock will no longer be treated as equity of Prudential Financial for federal income tax purposes or (b) the New
Jersey Department of Banking and Insurance amends, alters, changes or modifies the regulation of the Closed Block, the Closed
Block Business, the Class B Stock or the IHC debt in a manner that materially adversely affects the “CB Distributable Cash Flow”;
provided, however, that in no event may a holder of Class B Stock convert shares of Class B Stock to the extent such holder
immediately upon such conversion, together with its affiliates, would be the beneficial owner (as defined under the Securities
Exchange Act of 1934) of in excess of 9.9% of the total outstanding voting power of Prudential Financial’s voting securities. In the
event a holder of shares of Class B Stock requests to convert shares pursuant to clause (2)(a) in the preceding sentence, Prudential
Financial may elect, instead of effecting such conversion, to increase the Target Dividend Amount to $12.6875 per share per annum
retroactively from the time of issuance of the Class B Stock.
Prudential Financial 2005 Annual Report128