American Express 1998 Annual Report Download - page 54

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52
SFAS No. 128, “Earnings per Share,” requires the pre-
sentation of basic and diluted earnings per common share
(EPS) in the income statement. Under these require-
ments, basic EPS is computed using the average actual
shares outstanding during the period. Diluted EPS is
basic EPS adjusted for the dilutive effect of stock options,
restricted stock awards (RSAs) and other securities that
may be converted into common shares. The following is
a reconciliation of the numerators and denominators of
the basic and diluted EPS computations:
In the fourth quarter of 1996, the Company recorded a
$138 million charge ($216 million pretax) primarily for
restructuring costs related to a series of reengineering ini-
tiatives that were implemented in 1997. Of the total charge,
$125 million ($196 million pretax) related to TRS,
approximately two-thirds of which applied to international
businesses. Most of the remaining $13 million ($20 mil-
lion pretax) was due to the early retirement of debt at the
Corporate level. The pretax charge was included in Other
Expenses in the Consolidated Statements of Income. The
TRS restructuring charge included $109 million pretax in
severance costs and $87 million pretax to close certain
leased facilities, to consolidate or outsource certain opera-
tions and to write-down certain assets. As of December
31, 1997, the Company had substantially completed all
restructuring activities.
(millions, except per share amounts) 1998 1997 1996
Numerator:
Net income $ 2,141 $ 1,991 $ 1,901
Less: Preferred dividends ——5
Numerator for basic EPS $ 2,141 $ 1,991 $ 1,896
Effect of dilutive securities:
7.75% Convertible Preferred Shares ——5
Numerator for diluted EPS $ 2,141 $ 1,991 $ 1,901
Denominator:
Denominator for basic EPS — weighted-average shares 454.4 464.2 472.2
Effect of dilutive securities:
Stock Options and RSAs 8.3 8.8 8.2
5% Exchangeable Lehman Brothers Holdings, Inc.
Preferred Shares (see Note 6) —6.1 6.2
7.75% Convertible Preferred Shares —— 1.6
Other 0.1 0.1 0.1
Potentially dilutive common shares 8.4 15.0 16.1
Denominator for diluted EPS 462.8 479.2 488.3
Basic EPS $ 4.71 $ 4.29 $ 4.02
Diluted EPS $ 4.63 $ 4.15 $ 3.89
NOTE 13 EARNINGS PER COMMON SHARE
NOTE 14 RESTRUCTURING CHARGE