Sallie Mae 2006 Annual Report Download - page 175

14. Stockholders’ Equity (Continued)
continue to terminate portions of the contract if the stock price continues to reach lower pre-determined levels,
until the price hits the “final trigger price” and the entire contract is terminated. Counterparties have a maximum
of two triggers each. For equity forward contracts in effect as of December 31, 2006, the initial trigger price
ranged from approximately $25.93 to $35.58 and the final trigger price ranged from $20.84 to $27.37.
In addition, the majority of the Company’s equity forward contracts enable the counterparty to terminate
all outstanding equity forward contracts if the unsecured and unsubordinated long-term debt rating of the
Company falls to or below credit ratings of BBB⫺or Baa3 as prescribed by the credit ratings agencies,
Standard and Poor’s and Moody’s, respectively. This provision or one substantially the same is contained in
the contracts of nine of the Company’s ten equity forward counterparties with outstanding positions.
The Company has negotiated with each of its equity forward counterparties a limit on the total number of
shares that may be required to be delivered to that counterparty in net share settlement of the transactions. As
of December 31, 2006 and 2005, the aggregate maximum number of shares that the Company could be
required to deliver was 378.3 million and 330.3 million, respectively.
During December 2005, September 2004 and November 2004, the Company amended substantially all of
its outstanding equity forward purchase contracts. The strike prices on these contracts were adjusted to the then
current market share prices of the common stock and the total number of shares under contract was reduced
from 46.5 million, 53.4 million and 49.0 million shares to 42.4 million, 46.7 million and 42.2 million shares,
respectively. As a result of these amendments, the Company received a total of 4.1 million and 13.4 million
shares that settled in 2005 and 2004, respectively, in cashless transactions. This reduction of shares covered by
the equity forward contracts is shown on a net basis in the “settlements” row of the table below.
The following table summarizes the Company’s common share repurchase, issuance and equity forward
activity for the years ended December 31, 2006, 2005 and 2004.
2006 2005 2004
Years Ended December 31,
(Shares in millions)
Common shares repurchased:
Open market .......................................... 2.2 — .5
Equity forward contracts ................................. 5.4 17.3 32.7
Benefit plans
(1)
........................................ 1.6 1.5 1.5
Total shares repurchased ................................. 9.2 18.8 34.7
Average purchase price per share
(2)
......................... $52.41 $49.94 $38.03
Common shares issued .................................... 6.7 8.3 10.7
Equity forward contracts:
Outstanding at beginning of period ......................... 42.7 42.8 43.5
New contracts ......................................... 10.9 17.2 32.0
Settlements ........................................... (5.4) (17.3) (32.7)
Outstanding at end of period .............................. 48.2 42.7 42.8
Authority remaining at end of period to repurchase or enter into equity
forwards ............................................. 15.7 18.7 35.8
(1)
Shares withheld from stock option exercises and vesting of performance stock for employees’ tax withholding obligations and
shares tendered by employees to satisfy option exercise costs.
F-56
SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)