Sallie Mae 2009 Annual Report Download - page 197

11. Stockholders’ Equity (Continued)
approximately $2.0 billion of the net proceeds from the sale of Series C Preferred Stock and the sale of its
common stock to settle its outstanding equity forward contract (see “Common Stock Repurchase Program and
Equity Forward Contracts” below). The remaining proceeds were used for general corporate purposes. The
Company issued 9,781,170 shares of the 102 million share offering from its treasury stock. These shares were
removed from treasury stock at an average cost of $43.13, resulting in a $422 million decrease to the balance
of treasury stock with an offsetting $235 million decrease to retained earnings.
Common Stock Repurchase Program and Equity Forward Contracts
The Company has historically repurchased its common stock through both open market purchases and
settlement of equity forward contracts. Beginning on November 29, 2007, the Company amended or closed
out certain equity forward contracts. On December 19, 2007, the Company entered into a series of transactions
with its equity forward counterparties and Citibank, N.A. (“Citibank”) to assign all of its remaining equity
forward contracts, covering 44,039,890 shares, to Citibank. In connection with the assignment of the equity
forward contracts, the Company and Citibank amended the terms of the equity forward contract to eliminate
all stock price triggers (which had previously allowed the counterparty to terminate the contracts prior to their
scheduled maturity date) and termination events based on the Company’s credit ratings. The strike price of the
equity forward contract on December 19, 2007, was $45.25 with a maturity date of February 22, 2008. The
new Citibank equity forward contract was 100 percent collateralized with cash. On December 31, 2007, the
Company and Citibank agreed to physically settle the contract and the Company paid Citibank approximately
$1.1 billion, the difference between the contract purchase price and the previous market closing price on the
44,039,890 shares. This effectively changed the characteristics of the contract so it no longer was a derivative
accounted for under ASC 815 and instead was a liability (recorded at the present value of the repurchase
price) under ASC 480. Consequently, the common shares outstanding and shareholders’ equity on the
Company’s year-end balance sheet reflect the shares issued in the public offerings and the physical settlement
of the equity forward contract. As of December 31, 2007, the 44 million shares under this equity forward
contract are reflected in treasury stock. The Company paid Citibank the remaining balance of approximately
$0.9 billion due under the contract on January 9, 2008. The Company has no outstanding equity forward
positions outstanding after the contract settlement on January 9, 2008.
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SLM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Dollars in thousands, except per share amounts, unless otherwise stated)