Shareholders' Equity |
9 Months Ended | ||||||||
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Sep. 30, 2011 | |||||||||
| Stockholders' Equity Note [Abstract] | |||||||||
| Shareholders' Equity |
In August 2011, May 2011 and January 2011, the Board of Directors (the Board) declared the third quarter, second quarter and first quarter cash dividends of $0.01 per common share which were paid on September 23, 2011, June 24, 2011 and March 25, 2011 to common shareholders of record on September 2, 2011, June 3, 2011 and March 4, 2011, respectively.
There is no existing Board authorized share repurchase program. In connection with employee stock plans, the Corporation issued approximately 49 million shares and repurchased approximately 28 million shares to satisfy tax withholding obligations during the nine months ended September 30, 2011. At September 30, 2011, the Corporation had reserved 2.2 billion unissued shares of common stock for future issuances under employee stock plans, common stock warrants, convertible notes and preferred stock. On September 1, 2011, the Corporation issued to Berkshire Hathaway Inc. (Berkshire) a warrant to purchase 700 million shares of the Corporation's common stock (the Warrant). The Warrant is exercisable at the holder's option at any time, in whole or in part until September 1, 2021, at an exercise price of $7.142857 per share of the common stock which may be settled in cash or by exchanging all or a portion of the 6% Cumulative Perpetual Preferred Stock, Series T (the Series T Preferred Stock). For additional information on the Berkshire transaction, see Preferred Stock below.
During the nine months ended September 30, 2011, the Corporation issued approximately 197 million RSUs to certain employees under the Key Associate Stock Plan and the Merrill Lynch Employee Stock Compensation Plan. The majority of these awards generally vest in three equal annual installments beginning one year from the grant date. Certain awards are earned based on the achievement of specified performance criteria. Vested RSUs may be settled in cash or in shares of common stock depending on the terms of the applicable award. In 2011, approximately 130 million of these RSUs were authorized to be settled in shares of common stock. Certain awards contain clawback provisions which permit the Corporation to cancel all or a portion of the award under specified circumstances. The compensation cost for cash-settled awards and awards subject to certain clawback provisions is accrued over the vesting period and adjusted to fair value based upon changes in the share price of the Corporation's common stock. The compensation cost for the remaining awards is fixed and based on the share price of the Corporation's common stock on the date of grant, or the date upon which settlement in common stock has been authorized. The Corporation hedges a portion of its exposure to variability in the expected cash flows for certain unvested awards using a combination of economic and cash flow hedges as described in Note 4 – Derivatives.
During the first, second and third quarters of 2011, the aggregate dividends declared on preferred stock were $310 million, $301 million and $343 million, respectively, or a total of $954 million for the nine months ended September 30, 2011.
On September 1, 2011, the Corporation closed the sale to Berkshire of 50,000 shares of the Series T Preferred Stock and the Warrant for an aggregate purchase price of $5.0 billion in cash. Of the $5.0 billion in cash proceeds, $2.9 billion was allocated to preferred stock and $2.1 billion to the Warrant on a relative fair value basis. The discount on the Series T Preferred Stock is not subject to accretion. The portion of the proceeds allocated to the Warrant was recorded as additional paid-in capital.
The Series T Preferred Stock has a liquidation value of $100,000 per share and dividends on the Series T Preferred Stock accrue on the liquidation value at a rate per annum of six percent but will be paid only when, as and if declared by the Board out of legally available funds. Subject to the approval of the Board of Governors of the Federal Reserve System, the Series T Preferred Stock may be redeemed by the Corporation at any time at a redemption price of $105,000 per share plus any accrued, unpaid dividends. The Series T Preferred Stock has no maturity date and ranks senior to the outstanding common stock (and pari passu with the Corporation's other outstanding series of preferred stock) with respect to the payment of dividends and distributions in liquidation. At any time when dividends on the Series T Preferred Stock have not been paid in full, the unpaid amounts will accrue dividends at a rate per annum of eight percent and the Corporation will not be permitted to pay dividends or other distributions on, or to repurchase, any outstanding common stock or any of the Corporation's outstanding preferred stock of any series. Following payment in full of accrued but unpaid dividends on the Series T Preferred Stock, the dividend rate remains at eight percent per annum.
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