Xerox 2012 Annual Report Download - page 108

Notes to Consolidated Financial Statements
(in millions, except per-share data and where otherwise noted)
106
The following provides cumulative information relating to our share
repurchase programs from their inception in October 2005 through
December 31, 2012 (shares in thousands):
Authorized share repurchase programs $ 6,000
Share repurchase cost $ 4,691
Share repurchase fees $ 8
Number of shares repurchased 428,314
In 2012, the Board of Directors authorized an additional $1.5 billion in
share repurchase bringing the total authorization to $6 billion.
The following table reflects the changes in Common and Treasury stock
shares (shares in thousands):
Common Stock Treasury Stock
Shares Shares
Balance at December 31, 2009 869,381 –
Stock based compensation plans, net 37,018 –
ACS acquisition (1) 489,802 –
Other 1,377 –
Balance at December 31, 2010 1,397,578 –
Stock based compensation plans, net 11,027 –
Contributions to U.S. pension plan (2) 16,645 –
Acquisition of Treasury stock – 87,943
Cancellation of Treasury stock (72,435) (72,435)
Other 34 –
Balance at December 31, 2011 1,352,849 15,508
Stock based compensation plans, net 17,343 –
Contributions to U.S. pension plan (2) 15,366 –
Acquisition of Treasury stock – 146,278
Cancellation of Treasury stock (146,862) (146,862)
Other – –
Balance at December 31, 2012 1,238,696 14,924
(1) Refer to Note 3 – Acquisitions for additional information.
(2) Refer to Note 15 – Employee Benefits Plans for additional information.
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. We grant stock-based awards
in order to continue to attract and retain employees and to better
align employees’ interests with those of our shareholders. Each of
these awards is subject to settlement with newly issued shares of our
common stock. At December 31, 2012 and 2011, 50 million and 31
million shares, respectively, were available for grant of awards.
Stock-based compensation expense was as follows:
Year Ended December 31,
2012 2011 2010
Stock-based compensation expense, pre-tax $ 125 $ 123 $ 123
Income tax benefit recognized in earnings 48 47 47
Restricted Stock Units: Compensation expense is based upon the
grant date market price for most awards. The primary grant in 2009
had a market based condition and therefore the grant date price was
based on a Monte Carlo simulation. Compensation expense is recorded
over the vesting period, which is normally three years from the date
of grant, based on management’s estimate of the number of shares
expected to vest.
Performance Shares: We grant officers and selected executives PSs
that vest contingent upon meeting pre-determined Revenue, 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
annual actual results for Revenue exceed the stated targets and 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 cannot exceed 50% for officers and 25% for non-
officers of the original grant.
The fair value of PSs is based upon the market price of our stock on
the date of the grant. Compensation expense is recognized over the
vesting period, which is normally three years from the date of grant,
based on management’s estimate of the number of shares expected
to vest. If the stated targets are not met, any recognized compensation
cost would be reversed.
In connection with the ACS acquisition, selected ACS executives
received a special one-time grant of PSs that vest over a three-year
period ending February 2013 contingent upon ACS meeting pre-
determined annual earnings targets. These shares entitle the holder to
one share of common stock, payable after the three-year period and
the attainment of the targets. The aggregate number of shares that
may be delivered based on achievement of the targets was determined
on the date of grant and ranges in value as follows: 50% of base salary
(threshold); 100% of base salary (target); and 200% of base salary
plus 50% of the value of the August 2009 options (maximum).
Employee Stock Options: With the exception of the conversion of
ACS options in connection with the ACS acquisition (see below), we
have not issued any new stock options associated with our employee
long-term incentive plan since 2004. Substantially all stock options
previously issued under our employee long-term incentive plan are fully
exercised, cancelled or expired as of December 31, 2012.