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STOCKHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2012
STOCKHOLDERS' EQUITY  
STOCKHOLDERS' EQUITY

NOTE 14-STOCKHOLDERS’ EQUITY

 

Delaware Court Decision Related to SCC Shareholder Derivative Lawsuit:

 

Three purported class action derivative lawsuits were filed in the Delaware Court of Chancery (New Castle County) late in December 2004 and early January 2005 relating to the proposed merger transaction between the Company and Minera Mexico, S.A. de C.V. (the “Transaction”), which was completed effective April 1, 2005. On January 31, 2005, the three actions were consolidated into one action and the complaint filed by Lemon Bay was designated as the operative complaint in the consolidated lawsuit. The consolidated action purported to be brought on behalf of the Company and its common stockholders. The defendants in the consolidated action were AMC and SCC’s directors.  The Company was a nominal defendant.  The consolidated complaint alleged, among other things, that the Transaction was the result of breaches of fiduciary duties by the Company’s directors and was entirely unfair to the Company and its minority stockholders.

 

On October 9, 2012 the Company received from AMC, our majority shareholder, $2,108.2 million in satisfaction of the judgment issued pursuant to the decision of the Court of Chancery of Delaware, which concluded that we paid an excesive price to AMC in the 2005 merger between the Company and Minera Mexico, S.A. de C.V. From the aforementioned sum received from AMC, the Company paid $316.2 million of legal fees and expenses to the plaintiff’s attorneys to satisfy the court ordered award of attorneys’ fees and expenses. The effect of this award was recorded in the Company’s 2012 results. The $2,108.2 million awarded to the Company was included in the capital accounts (additional paid-in capital) on the balance sheet. Additionally, the Company recorded an operating expense of $316.2 million in its 2012 results for the legal fees related to this award.

 

Treasury Stock:

 

Activity in treasury stock in the years 2012 and 2011 was as follows (in millions):

 

 

 

2012

 

2011

 

Southern Copper common shares

 

 

 

 

 

 

 

Balance as of January 1,

 

$

734.1

 

$

461.0

 

Purchase of shares

 

147.3

 

273.6

 

Stock dividend distribution

 

(151.4

)

—

 

Used for corporate purposes

 

(0.2

)

(0.5

)

Balance as of December 31,

 

729.8

 

734.1

 

 

 

 

 

 

 

Parent Company (Grupo Mexico) common shares

 

 

 

 

 

Balance as of January 1,

 

163.7

 

161.7

 

Other activity, including dividend, interest and currency translation effect

 

25.3

 

2.0

 

Balance as of December 31,

 

189.0

 

163.7

 

 

 

 

 

 

 

Treasury stock balance as of December 31,

 

$

918.8

 

$

897.8

 

 

SCC shares of common stock in treasury:

 

At December 31, 2012 and 2011, treasury stock holds 39,045,536 shares and 43,616,086 shares of SCC’s common stock, respectively with a cost of $729.8 million and $734.1 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.

 

 

 

 

 

 

 

 

 

 

 

Maximum

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Shares

 

 

 

 

 

 

 

 

 

Average

 

Cumulative

 

that May Yet Be

 

 

 

 

 

 

 

Total Number

 

Price

 

Number of

 

Purchased Under

 

Total Cost

 

Period

 

of Shares

 

Paid per

 

Shares

 

the Plan

 

($ in

 

From

 

To

 

Purchased

 

Share

 

Purchased

 

@ $37.86(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

 

12/31/11

 

9,034,400

 

30.29

 

42,472,150

 

 

 

273.7

 

2012:

 

 

 

 

 

 

 

 

 

 

 

 

 

04/10/12

 

04/23/12

 

278,486

 

30.23

 

42,750,636

 

 

 

8.4

 

05/30/12

 

05/31/12

 

500,000

 

28.57

 

43,250,636

 

 

 

14.3

 

06/01/12

 

06/30/12

 

370,000

 

28.33

 

43,620,636

 

 

 

10.5

 

08/01/12

 

08/31/12

 

100,000

 

32.47

 

43,720,636

 

 

 

3.2

 

09/01/12

 

09/30/12

 

2,763,850

 

34.71

 

46,484,486

 

 

 

95.9

 

10/01/12

 

10/31/12

 

430,000

 

34.83

 

46,914,486

 

 

 

15.0

 

 

 

 

 

4,442,336

 

33.17

 

 

 

 

 

147.3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total purchased

 

 

 

46,914,486

 

18.72

 

 

 

3,220,925

 

$

878.1

 

 

 

(1)         NYSE price at December 31, 2012

 

As a result of the repurchase of shares of SCC’s common stock, Grupo Mexico’s direct and indirect ownership was 81.3% as of December 31, 2012 and 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, 2012 and 2011 was as follows:

 

 

 

2012

 

2011

 

Total SCC shares reserved for the plan

 

600,000

 

600,000

 

 

 

 

 

 

 

Total shares granted at January 1,

 

(271,200

)

(256,800

)

Granted in the period

 

(14,400

)

(14,400

)

Total shares granted at December 31,

 

(285,600

)

(271,200

)

 

 

 

 

 

 

Remaining shares reserved

 

314,400

 

328,800

 

 

Parent Company common shares:

 

At December 31, 2012 and 2011, there were in treasury 80,674,702 and 84,606,069 of Grupo Mexico’s common shares, respectively.

 

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, 2012, 2011 and 2010, the stock based compensation expense under the Employee Stock Purchase Plan was $2.1 million.  As of December 31, 2012, there was $4.2 million of unrecognized compensation expense under this plan, which is expected to be recognized over the remaining two year period.

 

The following table presents the stock award activity of the Employee Stock Purchase Plan for the years ended December 31, 2012 and 2011:

 

 

 

Shares

 

Unit Weighted Average
Grant Date Fair Value

 

Outstanding shares at January 1, 2012

 

7,270,341

 

$

1.16

 

Granted

 

—

 

—

 

Exercised

 

(220,430

)

1.16

 

Forfeited

 

(94,339

)

1.16

 

Outstanding shares at December 31, 2012

 

6,955,572

 

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, 2012, there was $3.2 million of unrecognized compensation expense under this plan, which is expected to be recognized over the remaining six year period.

 

The following table presents the stock award activity of the New Employee Stock Purchase Plan for the years ended December 31, 2012 and 2011:

 

 

 

Shares

 

Unit Weighted Average
Grant Date Fair Value

 

Outstanding shares at January 1, 2012

 

3,807,146

 

$

2.05

 

Granted

 

—

 

—

 

Exercised

 

(772,850

)

2.05

 

Forfeited

 

(89,554

)

2.05

 

Outstanding shares at December 31, 2012

 

2,944,742

 

2.05

 

 

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.