Xerox 2007 Annual Report Download - page 130

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
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 were released in January
2008.
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 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, 2007 and 2006,
19 million and 25 million shares, respectively, were
available for grant of awards.
Total compensation related to these programs was
$89, $64 and $40 for the years ended December 31,
2007, 2006 and 2005, respectively. The related income
tax benefit recognized was $34, $25 and $16 for 2007,
2006 and 2005, 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 RSUs 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, 2007, 2006 and
2005, and changes during the years then ended, is
presented below (shares in thousands):
2007 2006 2005
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 .................... 8,635 $15.71 5,491 $15.69 2,804 $13.86
Granted .................................... 4,444 18.17 4,256 15.18 3,750 16.89
Vested ...................................... (935) 13.65 (686) 13.70 (977) 15.01
Cancelled ................................... (448) 16.42 (426) 13.45 (86) 16.21
Outstanding at December 31 .............. 11,696 16.78 8,635 15.71 5,491 15.69
At December 31, 2007, the aggregate intrinsic value
of RSUs outstanding was $189. The total intrinsic value of
RSUs vested during 2007, 2006 and 2005 was $16, $10
and $13, respectively. The actual tax benefit realized for
the tax deductions for vested RSUs totaled $3, $3 and $4
for the years ended December 31, 2007, 2006 and 2005,
respectively.
At December 31, 2007, there was $89 of total
unrecognized compensation cost related to nonvested
RSUs, which is expected to be recognized ratably over a
remaining weighted-average contractual term of 1.9
years.
Performance Shares: We grant officers and selected
executives PSs whose vesting is contingent upon meeting
pre-determined Diluted Earnings per Share (“EPS”) and
Cash Flow from Operations targets. These shares entitle
the holder to one share of common stock, payable after a
three-year period and the attainment of the stated goals.
If the cumulative three-year actual results for EPS and
Cash Flow from Operations exceed the stated targets,
then the plan participants have the potential to earn
additional shares of common stock. This overachievement
can not exceed 50% for officers and 25% for non-officers
of the original grant.
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