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CHK » Topics » 4. Net Income (Loss) Per Share

This excerpt taken from the CHK 10-Q filed May 12, 2008.

4. Net Income (Loss) Per Share

Statement of Financial Accounting Standards No. 128, Earnings Per Share, requires presentation of “basic” and “diluted” earnings per share, as defined, on the face of the statements of operations for all entities with complex capital structures. SFAS 128 requires a reconciliation of the numerator and denominator of the basic and diluted EPS computations. For the Current Quarter, there was no difference between actual weighted average shares outstanding, which are used in computing basic EPS, and diluted weighted average shares, which are used in computing EPS assuming dilution.

As a result of the Current Quarter’s net loss to common shareholders, diluted shares do not include the effect of (i) outstanding stock options to purchase 2.6 million shares of common stock at a weighted average exercise price of $7.71, (ii) 5.3 million shares of unvested restricted stock at a weighted average grant-date fair value of $34.07 and (iii) the assumed conversion of the following outstanding preferred stock:

 

  •  

4.125% preferred stock convertible into 184,200 common shares,

 

  •  

5.00% (Series 2005) convertible preferred stock convertible into 19,432 common shares,

 

  •  

5.00% (Series 2005B) convertible preferred stock convertible into 14,719,425 common shares,

 

  •  

4.50% preferred stock convertible into 7,810,800 common shares, and

 

  •  

6.25% mandatory convertible preferred stock convertible into 1,031,175 common shares.

A reconciliation for the three months ended March 31, 2007 is as follows:

 

    Income
(Numerator)		   Shares
(Denominator)		   Per Share
Amount
    (in millions, except per share data)

For the Three Months Ended March 31, 2007:

      

Basic EPS:

      

Income available to common shareholders

   $ 232   451   $ 0.51
               

Effect of Dilutive Securities

      

Assumed conversion as of the beginning of the period of preferred shares outstanding during the period:

      

Common shares assumed issued for 4.50% convertible preferred stock

     —   8  

Common shares assumed issued for 5.00% convertible preferred stock (Series 2005)

     —   18  

Common shares assumed issued for 5.00% convertible preferred stock (Series 2005B)

     —   15  

Common shares assumed issued for 6.25% convertible preferred stock

     —   19  

Employee stock options

     —   3  

Restricted stock

     —   2  

Preferred stock dividends

     26   —  
           

Diluted EPS Income available to common shareholders and assumed conversions

   $ 258   516   $ 0.50
               
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