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STOCKHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2011
STOCKHOLDERS' EQUITY.  
STOCKHOLDERS' EQUITY

NOTE 15-STOCKHOLDERS’ EQUITY

 

Appropriated Retained Earnings:

 

As of December 31, 2011, the Company management set aside $2.0 billion of unremitted earnings of its Mexican subsidiary, Minera Mexico, as appropriated retained earnings.  It is the Company’s intention to indefinitely invest these funds in Mexico.  These amounts are earmarked for the Company’s Mexican expansion program.  See also Note 8 “Income taxes” of these financial statements.

 

Treasury Stock:

 

Activity in treasury stock in the years 2011 and 2010 was as follows (in millions):

 

 

 

2011

 

2010

 

Southern Copper common shares

 

 

 

 

 

Balance as of January 1,

 

$

461.0

 

$

460.7

 

Purchase of shares

 

273.6

 

0.5

 

Used for corporate purposes

 

(0.5

)

(0.2

)

Balance as of December 31,

 

734.1

 

461.0

 

 

 

 

 

 

 

Parent Company (Grupo Mexico) common shares

 

 

 

 

 

Balance as of January 1,

 

161.7

 

142.7

 

Other activity, including dividend, interest and currency translation effect

 

2.0

 

19.0

 

Balance as of December 31,

 

163.7

 

161.7

 

 

 

 

 

 

 

Treasury stock balance as of December 31,

 

$

897.8

 

$

622.7

 

 

SCC shares of common stock in treasury:

 

At December 31, 2011 and 2010, treasury stock holds 43,616,086 shares and 34,596,086 shares of SCC’s common stock, respectively with a cost of $734.1 million and $461.0 million, respectively.  The shares of SCC’s common stock held in treasury are used for general corporate purposes.

 

SCC share repurchase program:

 

In 2008, the Company´s Board of Directors authorized a $500 million share repurchase program.  On July 28, 2011, the Board of Directors approved an increase of the SCC share repurchase program from $500 million to $1.0 billion.  Pursuant to this program, the Company purchased common stock as shown in the table below.  These shares are available for general corporate purposes.  The Company may purchase additional shares of its common stock from time to time, based on market conditions and other factors.  This repurchase program has no expiration date and may be modified or discontinued at any time.

 

Period

 

Total Number
of Shares

 

Average
Price
Paid per

 

Total Number of
Shares Purchased as
Part of Publicly

 

Maximum
Number of Shares
that May Yet Be
Purchased Under
the Plan

 

Total Cost
($ in

 

From

 

To

 

Purchased

 

Share

 

Announced Plan

 

@ $30.18(1)

 

millions)

 

2008:

 

 

 

 

 

 

 

 

 

 

 

 

 

08/11/08

 

12/31/08

 

28,510,150

 

13.49

 

28,510,150

 

 

 

$

384.7

 

2009:

 

 

 

 

 

 

 

 

 

 

 

 

 

01/12/09

 

09/30/09

 

4,912,000

 

14.64

 

33,422,150

 

 

 

71.9

 

2010:

 

 

 

 

 

 

 

 

 

 

 

 

 

05/05/10

 

10/14/10

 

15,600

 

29.69

 

33,437,750

 

 

 

0.5

 

2011:

 

 

 

 

 

 

 

 

 

 

 

 

 

05/01/11

 

05/31/11

 

14,400

 

37.06

 

33,452,150

 

 

 

0.5

 

06/01/11

 

06/30/11

 

4,567,520

 

32.30

 

38,019,670

 

 

 

147.5

 

08/03/11

 

08/22/11

 

2,762,811

 

29.63

 

40,782,481

 

 

 

81.9

 

09/22/11

 

09/30/11

 

1,069,669

 

26.59

 

41,852,150

 

 

 

28.4

 

10/03/11

 

10/21/11

 

620,000

 

24.73

 

42,472,150

 

 

 

15.3

 

 

 

 

 

9,034,400

 

30.29

 

 

 

 

 

273.7

 

Total purchased

 

42,472,150

 

17.20

 

 

 

8,922,746

 

$

730.7

 

 

(2)         NYSE price at December 31, 2011

 

As a result of the repurchase of shares of SCC’s common stock and purchases by AMC of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 80% as of December 31,2010 and increased to 80.9% at December 31, 2011.

 

Directors’ Stock Award Plan:

 

The Company established a stock award compensation plan for certain directors who are not compensated as employees of the Company.  Under this plan, participants will receive 1,200 shares of common stock upon election and 1,200 additional shares following each annual meeting of stockholders thereafter. 600,000 shares of Southern Copper common stock have been reserved for this plan.  The fair value of the award is measured each year at the date of the grant.

 

The activity of this plan for the years ended December 31, 2011 and 2010 is as follows:

 

 

 

2011

 

2010

 

 

 

 

 

 

 

Total SCC shares reserved for the plan

 

600,000

 

600,000

 

 

 

 

 

 

 

Total shares granted at January 1,

 

(256,800

)

(241,200

)

Granted in the period

 

(14,400

)

(15,600

)

Total shares granted at December 31,

 

(271,200

)

(256,800

)

 

 

 

 

 

 

Remaining shares reserved

 

328,800

 

343,200

 

 

Parent Company common shares:

 

Employee Stock Purchase Plan:

 

In January 2007, the Company offered to eligible employees a stock purchase plan (the “Employee Stock Purchase Plan”) through a trust that acquires shares of Grupo Mexico stock for sale to its employees, employees of subsidiaries, and certain affiliated companies.  The purchase price is established at the approximate fair market value on the grant date.  Every two years employees will be able to acquire title to 50% of the shares paid in the previous two years.  The employees will pay for shares purchased through monthly payroll deductions over the eight year period of the plan.  At the end of the eight year period, the Company will grant the participant a bonus of 1 share for every 10 shares purchased by the employee.

 

If Grupo Mexico pays dividends on shares during the eight year period, the participants will be entitled to receive the dividend in cash for all shares that have been fully purchased and paid as of the date that the dividend is paid.  If the participant has only partially paid for shares, the entitled dividends will be used to reduce the remaining liability owed for purchased shares.

 

In the case of voluntary resignation of the employee, the Company will pay to the employee the fair market sales price at the date of resignation of the fully paid shares, net of costs and taxes.  When the fair market sales value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on the following schedule:

 

If the resignation occurs during:

 

% Deducted

 

1st year after the grant date

 

90

%

2nd year after the grant date

 

80

%

3rd year after the grant date

 

70

%

4th year after the grant date

 

60

%

5th year after the grant date

 

50

%

6th year after the grant date

 

40

%

7th year after the grant date

 

20

%

 

In the case of involuntary termination of the employee, the Company will pay to the employee the fair market sales price at the date of termination of employment of the fully paid shares, net of costs and taxes.  When the fair market value of the shares is higher than the purchase price, the Company will apply a deduction over the amount to be paid to the employee based on the following schedule:

 

If the termination occurs during:

 

% Deducted

 

1st year after the grant date

 

100

%

2nd year after the grant date

 

95

%

3rd year after the grant date

 

90

%

4th year after the grant date

 

80

%

5th year after the grant date

 

70

%

6th year after the grant date

 

60

%

7th year after the grant date

 

50

%

 

In case of retirement or death of the employee, the Company will render the buyer or his legal beneficiary, the fair market sales value as of the date of retirement or death of the shares effectively paid, net of costs and taxes.

 

For each of the years ended December 31, 2011, 2010 and 2009, the stock based compensation expense under the Employee Stock Purchase Plan was $2.1 million.  As of December 31, 2011, there was $6.4 million of unrecognized compensation expense under this plan, which is expected to be recognized over the remaining three year period.

 

The following table presents the stock award activity of the Employee Stock Purchase Plan for the years ended December 31, 2011 and 2010:

 

 

 

Shares

 

Unit Weighted Average
Grant Date Fair Value

 

 

 

 

 

 

 

Outstanding shares at January 1, 2010

 

11,556,625

 

$

1.16

 

Granted

 

—

 

—

 

Exercised

 

—

 

—

 

Forfeited

 

(635,932

)

1.16

 

Outstanding shares at December 31, 2010

 

10,920,693

 

$

1.16

 

 

 

 

 

 

 

Outstanding shares at January 1, 2011

 

10,920,693

 

$

1.16

 

Granted

 

—

 

—

 

Exercised

 

(3,402,855

)

1.16

 

Forfeited

 

(247,497

)

1.16

 

Outstanding shares at December 31, 2011

 

7,270,341

 

$

1.16

 

 

During 2010, the Company offered to eligible employees a new stock purchase plan (the “New Employee Stock Purchase Plan”) through a trust that acquires series B shares of Grupo Mexico stock for sale to its employees, employees of subsidiaries, and certain affiliated companies.

 

The purchase price was established at 26.51 Mexican pesos (approximately $2.05) for the initial subscription.  The terms of the New Employee Stock Purchase Plan are similar to the terms of the Employee Stock Purchase Plan.

 

At December 31, 2011, there was $3.8 million of unrecognized compensation expense under this plan, which is expected to be recognized over the remaining seven year period.

 

The following table presents the stock award activity of the New Employee Stock Purchase Plan for the year ended December 31, 2011:

 

 

 

Shares

 

Unit Weighted Average
Grant Date Fair Value

 

Outstanding shares at January 1, 2011

 

3,901,901

 

$

2.05

 

Granted

 

51,923

 

2.05

 

Exercised

 

—

 

—

 

Forfeited

 

(146,678

)

2.05

 

Outstanding shares at December 31, 2011

 

3,807,146

 

$

2.05

 

 

Executive Stock Purchase Plan:

 

Grupo Mexico also offers a stock purchase plan for certain members of its executive management and the executive management of its subsidiaries and certain affiliated companies.  Under this plan, participants will receive incentive cash bonuses which are used to purchase shares of Grupo Mexico which are deposited in a trust.