Xerox 2006 Annual Report Download - page 103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Convertible Preferred shares. The redemption was
accounted for through a transfer of $483 from preferred
stock to common stock and additional paid-in-capital.
Dividends were paid through the redemption date.
Preferred Stock Purchase Rights: We have a
shareholder rights plan designed to deter coercive or
unfair takeover tactics and to prevent a person or persons
from gaining control of us without offering a fair price to
all shareholders. Under the terms of this plan, one-half of
one preferred stock purchase right (“Right”) accompanies
each share of outstanding common stock. Each full Right
entitles the holder to purchase from us one three-
hundredth of a new series of preferred stock at an
exercise price of $250. Within the time limits and under
the circumstances specified in the plan, the Rights entitle
the holder to acquire either our common stock, the stock
of the surviving company in a business combination, or
the stock of the purchaser of our assets, having a value of
two times the exercise price. The Rights, which expire in
April 2007, may be redeemed prior to becoming
exercisable by action of the Board of Directors at a
redemption price of $.01 per Right. The Rights are
non-voting and, until they become exercisable, have no
dilutive effect on the earnings per share or book value per
share of our common stock.
Note 18 – Common Stock
We have 1.75 billion authorized shares of common
stock, $1 par value. At December 31, 2006, 106 million
shares were reserved for issuance under our incentive
compensation plans, 48 million shares were reserved for
debt to equity exchanges, 15 million shares were reserved
for the conversion of the Series C Mandatory Convertible
Preferred Stock and 2 million shares were reserved for
the conversion of convertible debt. The 15 million shares
reserved for the conversion of the Series C Mandatory
Convertible Preferred Stock are expected to be released
in 2007, since conversion was completed in 2006.
Stock-Based Compensation: We have a long-term
incentive plan whereby eligible employees may be
granted restricted stock units (“RSUs”), performance
shares (“PSs”) and non-qualified stock options.
In January 2005, we implemented changes in our
stock-based compensation programs designed to help us
continue to attract and retain employees and to better
align employee interests with those of our shareholders.
With these changes, in lieu of stock options we began
granting PSs and expanded the use of RSUs. Each of
these awards is subject to settlement with newly issued
shares of our common stock. At December 31, 2006 and
2005, 25.0 million and 38.9 million shares, respectively,
were available for grant of awards.
Total compensation related to these programs was
$64, $40 and $22 for the years ended December 31, 2006,
2005 and 2004, respectively. The related income tax
benefit recognized was $25, $16 and $8 for 2006, 2005
and 2004, respectively. A description of each of our
stock-based compensation programs follows:
Restricted Stock Units: Prior to 2005, the RSUs were generally subject to a three-year ratable vesting period
from the date of grant and entitled the holder to one share of common stock. In 2005, the terms of newly-issued RSU’s
were changed such that the entire award vests three years from the date of grant. Compensation expense is based upon
the grant date market price and is recorded over the vesting period. A summary of the activity for RSUs as of
December 31, 2006, 2005 and 2004, and changes during the years then ended, is presented below (shares in thousands):
2006 2005 2004
Nonvested Restricted Stock Units Shares
Weighted
Average Grant
Date Fair Value Shares
Weighted
Average Grant
Date Fair Value Shares
Weighted
Average Grant
Date Fair Value
Outstanding at January 1 ................ 5,491 $15.69 2,804 $13.86 2,180 $10.46
Granted .............................. 4,256 15.18 3,750 16.89 2,539 13.70
Vested ............................... (686) 13.70 (977) 15.01 (1,905) 9.72
Cancelled ............................ (426) 13.45 (86) 16.21 (10) 19.14
Outstanding at December 31 ............ 8,635 15.71 5,491 15.69 2,804 13.86
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