Sallie Mae 2006 Annual Report Download - page 174

13. Commitments, Contingencies and Guarantees (Continued)
time to time, the Company receives information and document requests from state attorney generals
concerning certain of its business practices. The Company’s practice has been and continues to be to cooperate
with the state attorney generals and to be responsive to any such requests.
14. Stockholders’ Equity
Preferred Stock
At December 31, 2006, the Company had 3.3 million shares of 6.97 percent Cumulative Redeemable
Preferred Stock, Series A (the “Series A Preferred Stock”) and 4.0 million shares of Floating-Rate Non-
Cumulative Preferred Stock, Series B (the “Series B Preferred Stock”) outstanding. Neither series has a
maturity date but can be redeemed at the Company’s option beginning November 16, 2009 for Series A, and
on any dividend payment date on or after June 15, 2010 for Series B. Redemption would include any accrued
and unpaid dividends up to the redemption date. The shares have no preemptive or conversion rights and are
not convertible into or exchangeable for any of the Company’s other securities or property. Dividends on both
series are not mandatory and are paid quarterly, when, as, and if declared by the Board of Directors. Holders
of Series A Preferred Stock are entitled to receive cumulative, quarterly cash dividends at the annual rate of
$3.485 per share. Holders of Series B Preferred Stock are entitled to receive quarterly dividends, based on
3-month LIBOR plus 70 basis points per annum in arrears, on and until June 15, 2011, increasing to 3-month
LIBOR plus 170 basis points per annum in arrears, after and including the period beginning on June 15, 2011.
Upon liquidation or dissolution of the Company, holders of the Series A and Series B Preferred Stock are
entitled to receive $50 and $100 per share, respectively, plus an amount equal to accrued and unpaid dividends
for the then current quarterly dividend period, if any, pro rata, and before any distribution of assets are made
to holders of the Company’s common stock.
Common Stock
The Company’s shareholders have authorized the issuance of 1.1 billion shares of common stock (par
value of $.20). At December 31, 2006, 410.6 million shares were issued and outstanding and 75 million shares
were unissued but encumbered for outstanding convertible debt and outstanding options and remaining
authority for stock-based compensation plans. The convertible debt offering and stock-based compensation
plans are described in Note 8, “Long-Term Borrowings,” and Note 16, “Stock-Based Compensation Plans,”
respectively. The Company has also encumbered 378.3 million shares out of those authorized for potential
issuances for net share settlement of equity forward contracts.
In December 2005, the Company retired 65 million shares of common stock held in treasury at an
average price of $37.35 per share. This retirement decreased the balance in treasury stock by $2.4 billion, with
corresponding decreases of $13 million in common stock and $2.4 billion in retained earnings.
Common Stock Repurchase Program and Equity Forward Contracts
The Company repurchases its common stock through both open market purchases and settlement of
equity forward contracts. At December 31, 2006, the Company had outstanding equity forward contracts to
purchase 48.2 million shares of its common stock at prices ranging from $46.30 to $54.74 per share.
The equity forward contracts permit the counterparty to terminate a portion of the contracts prior to their
maturity date and to force the Company to settle the contracts if the price of the Company’s common stock falls
below pre-determined levels as defined by the contract as the “initial trigger price.” The counterparty can
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)