Xerox 2009 Annual Report Download - page 85

83Xerox 2009 Annual Report
Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
of shares determined by reference to the price paid for our common
stock upon a change in control. In addition, upon the occurrence of
certain fundamental change events, including a future change in control
of Xerox or if Xerox common stock ceases to be listed on a national
securities exchange, the holders of Convertible Preferred Stock will have
the right to require us to redeem any or all of the Convertible Preferred
Stock in cash at a redemption price per share equal to the liquidation
preference and any accrued and unpaid dividends to, but not including,
the redemption date. The Convertible Preferred Stock will be classified as
temporary equity (i.e., apart from permanent equity) as a result of the
contingent redemption feature.
Common Stock
We have 1.75 billion authorized shares of common stock, $1 par value.
At December 31, 2009, 79 million shares were reserved for issuance
under our incentive compensation plans, 48 million shares were reserved
for debt to equity exchanges and two million shares were reserved for
the conversion of convertible debt.
In connection with the acquisition of ACS in February 2010 (see Note
3 – Acquisitions for further information), we issued approximately
489,800 thousand shares of common stock to holders of ACS Class A
and Class B common stock.
Treasury Stock
Our Board of Directors has authorized programs for repurchase of the
Company’s common stock. During the year ended December 31, 2009,
we did not purchase any common stock and we have no immediate
plans for further share repurchases.
The following provides cumulative information relating to our share
repurchase programs from their inception in October 2005 through
December 31, 2009 (shares in thousands):
Authorized share repurchase $ 4,500
Share repurchases $ 2,941
Share repurchase fees $ 4
Number of shares repurchased 194,093
Product Warranty Liabilities
In connection with our normal sales of equipment, including
those under sales-type leases, we generally do not issue product
warranties. Our arrangements typically involve a separate full-service
maintenance agreement with the customer. The agreements generally
extend over a period equivalent to the lease term or the expected
useful life under a cash sale. The service agreements involve the pay-
ment of fees in return for our performance of repairs and maintenance.
As a consequence, we do not have any significant product warranty
obligations, including any obligations under customer satisfaction
programs. In a few circumstances, particularly in certain cash sales,
we may issue a limited product warranty if negotiated by the customer.
We also issue warranties for certain of our lower-end products in the
Office segment, where full-service maintenance agreements are not
available. In these instances, we record warranty obligations at the time
of the sale. Aggregate product warranty liability expenses for the three
years ended December 31, 2009 were $34, $39 and $40, respectively.
Total product warranty liabilities as of December 31, 2009 and 2008
were $20 and $27, respectively.
Note 17 – Shareholders’ Equity
Preferred Stock
As of December 31, 2009, we had no preferred stock shares or
preferred stock purchase rights outstanding. We are authorized to
issue approximately 22 million shares of cumulative preferred stock,
$1 par value.
In connection with the acquisition of ACS in February 2010 (see Note
3 – Acquisitions for further information), we issued 300,000 shares of
Convertible Preferred Stock with an aggregate liquidation preference
of $300 to the holders of ACS Class B Common Stock. The Convertible
Preferred Stock will pay quarterly cash dividends at a rate of 8 percent
per year and will have a liquidation preference of $1,000 per share.
Each share of Convertible Preferred Stock will be convertible at any
time, at the option of the holder, into 89.8876 shares of common
stock for a total of 26,966 thousand shares (which reflects an initial
conversion price of approximately $11.125 per share of common
stock, which is a 25% premium over $8.90, which was the average
closing price of Xerox common stock over the seven-trading day period
ended on September 14, 2009, and the number used for calculating
the conversion price in the ACS merger agreement), subject to customary
anti-dilution adjustments. On or after the fifth anniversary of the issue
date, we will have the right to cause, under certain circumstances, any
or all of the Convertible Preferred Stock to be converted into shares of
common stock at the then applicable conversion rate. The holders of
Convertible Preferred Stock will also be able to convert upon a change
in control at the applicable conversion rate plus an additional number