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Prudential Financial 2001 Annual Report - page 133 / 172

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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:

Income

Per Share

(In Millions)

Shares

Amount

December 18, 2001 through December 31, 2001

$0.07

580,047,053

Basic earnings per share Net income attributable to the Financial Services Businesses available to holders of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38

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

Closed

Services

Block

Businesses

Business

Net Income As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Basic EPS As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Diluted EPS As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$0.07

$1.50

0.06

1.50

$0.07

$1.50

0.06

1.50

$ 38 37

$

3 3

Prudential Financial 2001 Annual Report

131

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