NOTE 9: Shareholders' Equity
Authorized shares of preferred stock were 5.0 million ($5 par value) at January 31, 2014 and February 1, 2013, none of which have been issued. The Board of Directors may issue the preferred stock (without action by shareholders) in one or more series, having such voting rights, dividend and liquidation preferences, and such conversion and other rights as may be designated by the Board of Directors at the time of issuance.
Authorized shares of common stock were 5.6 billion ($.50 par value) at January 31, 2014 and February 1, 2013.
The Company has a share repurchase program that is executed through purchases made from time to time either in the open market or through private off-market transactions. Shares purchased under the repurchase program are retired and returned to authorized and unissued status. On February 1, 2013, the Company’s Board of Directors authorized a $5.0 billion share repurchase program with no expiration. As of January 31, 2014, the Company had $1.3 billion remaining available under this authorization. On January 31, 2014, the Company's Board of Directors authorized an additional $5.0 billion repurchase program with no expiration, following which, the Company had available share repurchase authorization of $6.3 billion.
During the year ended January 31, 2014, the Company entered into Accelerated Share Repurchase (ASR) agreements with third-party financial institutions to repurchase a total of 55.0 million shares of the Company's common stock for $2.25 billion. At inception, the Company paid the financial institutions using cash on hand and took initial delivery of shares. Under the terms of the ASR agreements, upon settlement, the Company would either receive additional shares from the financial institution or be required to deliver additional shares or cash to the financial institution. The Company controlled its election to either deliver additional shares or cash to the financial institution and was subject to provisions which limited the number of shares the Company would be required to deliver.
The final number of shares received upon settlement of each ASR agreement was determined with reference to the volume-weighted average price of the Company’s common stock over the term of the ASR agreement. The initial repurchase of shares under these agreements resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share.
These ASR agreements were accounted for as treasury stock transactions and forward stock purchase contracts. The par value of the shares received was recorded as a reduction to common stock with the remainder recorded as a reduction to capital in excess of par value and retained earnings. The forward stock purchase contract was considered indexed to the Company’s own stock and was classified as an equity instrument.
During the year ended January 31, 2014, the Company also repurchased shares of its common stock through the open market totaling 31.6 million shares for a cost of $1.5 billion.
The Company also withholds shares from employees to satisfy either the exercise price of stock options exercised or the statutory withholding tax liability resulting from the vesting of restricted stock awards.
Shares repurchased for 2013 and 2012 were as follows:
|
| | | | | | | | | | | | | |
| 2013 | | 2012 |
(In millions) | Shares |
| | Cost1 |
| | Shares |
| | Cost1 |
|
Share repurchase program | 86.6 |
| | $ | 3,732 |
| | 145.7 |
| | $ | 4,350 |
|
Shares withheld from employees | 1.0 |
| | 38 |
| | 1.5 |
| | 43 |
|
Total share repurchases | 87.6 |
| | $ | 3,770 |
| | 147.2 |
| | $ | 4,393 |
|
1Reductions of $3.4 billion and $3.9 billion were recorded to retained earnings, after capital in excess of par value was depleted, for 2013 and 2012, respectively.
