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Shareholders' Equity
 12 Months Ended
Dec. 31, 2011
Shareholders' Equity [Abstract]  
SHAREHOLDERS' EQUITY

16. SHAREHOLDERS’ EQUITY

16.1 Outstanding shares

The authorized share capital of the Company is Euro 1,810 million consisting of 1,200,000,000 common shares and 540,000,000 preference shares, each with a nominal value of €1.04. As at December 31, 2011 the number of shares of common stock issued was 910,559,805 shares (910,420,305 at December 31, 2010).

As of December 31, 2011 the number of shares of common stock outstanding was 884,995,094 (881,686,303 at December 31, 2010).

16.2 Preference shares

The 540,000,000 preference shares, when issued, will entitle a holder to full voting rights and to a preferential right to dividends and distributions upon liquidation.

On January 22, 2008, an option agreement was concluded between the Company and Stichting Continuïteit ST. This option agreement provides for the issuance of 540,000,000 preference shares. Any such shares should be issued by the Company to the Foundation, upon its request and in its sole discretion, upon payment of at least 25% of the par value of the preference shares to be issued. The issuing of the preference shares is conditional upon (i) the Company receiving an unsolicited offer or there being the threat of such an offer; (ii) the Company’s Managing and Supervisory Boards deciding not to support such an offer and; (iii) the Board of the Foundation determining that such an offer or acquisition would be contrary to the interests of the Company and its stakeholders. The preference shares may remain outstanding for no longer than two years. There were no preference shares issued as of December 31, 2011.

16.3 Treasury stock

Following the authorization by the Supervisory Board, announced on April 2, 2008, to repurchase up to 30 million shares of its common stock, the Company acquired 29,520,220 shares in 2008, also reflected at cost, as a reduction of the parent company stockholders’ equity.

The treasury shares have been designated for allocation under the Company’s share based remuneration programs of non-vested shares. As of December 31, 2011, 17,355,509 of these treasury shares were transferred to employees under the Company’s share based remuneration programs, of which 3,169,291 in the year ended December 31, 2011.

As of December 31, 2011, the Company owned a number of treasury shares equivalent to 25,564,711.

 

16.4 Stock option plans

In 1999, the Shareholders voted to renew the Supervisory Board Stock Option Plan whereby each member of the Supervisory Board would receive, during the three-year period 1999-2001, 18,000 options for 1999 and 9,000 options for both 2000 and 2001, to purchase shares of capital stock at the closing market price of the shares on the date of the grant. In the same three-year period, the professional advisors to the Supervisory Board would receive 9,000 options for 1999 and 4,500 options for both 2000 and 2001. Under the Plan, the options vest over one year and are exercisable for a period expiring eight years from the date of grant for both 1999 and 2000 and ten years from the date of grant for 2001.

In 2001, the Shareholders voted to adopt the 2001 Employee Stock Option Plan (the “2001 Plan”) whereby options for up to 60,000,000 shares may be granted in installments over a five-year period. The options may be granted to purchase shares of common stock at a price not lower than the market price of the shares on the date of grant. In connection with a revision of its equity-based compensation policy, the Company decided in 2005 to accelerate the vesting period of all outstanding unvested stock options. The options expire ten years after the date of grant.

In 2002, the Shareholders voted to adopt a Stock Option Plan for Supervisory Board Members and Professionals of the Supervisory Board. Under this plan, 12,000 options can be granted per year to each member of the Supervisory Board and 6,000 options per year to each professional advisor to the Supervisory Board. Options vest thirty days after the date of grant and expire ten years after the date of grant.

A summary of the stock option activity for the plans for the three years ended December 31, 2011, 2010 and 2009 follows:

 

 

                     
         

Price Per Share

  
    Number of Shares    

Range

   Weighted
Average		  

Outstanding at December 31, 2008

     39,431,433     $16.73-$39.00   $ 27.35  
   

 

 

    

 

  

 

 

  

Options forfeited

     (1,487,601 )    $17.08-$39.00   $ 27.69  

Outstanding at December 31, 2009

     37,943,832     $16.73-$39.00   $ 27.33  
   

 

 

    

 

  

 

 

  

Options forfeited

     (2,646,937 )    $17.08-$39.00   $ 29.55  

Outstanding at December 31, 2010

     35,296,895     $16.73-$39.00   $ 27.17  
   

 

 

    

 

  

 

 

  

Options forfeited

     (8,843,743 )    $17.08-$39.00   $ 35.11  

Outstanding at December 31, 2011

     26,453,152     $16.73-$33.70   $ 24.51  
   

 

 

    

 

  

 

 

  

The weighted average remaining contractual life of options outstanding as of December 31, 2011, 2010 and 2009 was 1.2, 1.9 and 2.9 years, respectively.

The range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life of options exercisable as of December 31, 2011 were as follows:

 

 

                     

Number of shares

  

Option price

Range

   Weighted
average
exercise price		     Weighted
average
remaining
contractual life		  

9,152,774

   $31.09-$33.70   $ 31.11       0.25  

97,850

   $25.90-$27.21   $ 26.05       1.84  

17,086,847

   $19.18-$22.83   $ 21.02       1.77  

115,681

   $16.73-$17.08   $ 17.03       2.73  

16.5 Nonvested share awards

On an annual basis, the Compensation Committee (on behalf of the Supervisory Board and with its approval) grants stock-based awards to the members and professionals of the Supervisory Board (“The Supervisory Board Plan”) and to senior executives along with selected employees (“The Employee Plan”). The awards are granted at the nominal value of the share of €1.04 under the Supervisory Board Plan and for free under the Employee Plan. The awards granted under the Supervisory Board Plan vest evenly over three years (one third every year), with no market, performance or service conditions. As for the Employee Plan, the awards vest upon completion of three internal performance conditions (consisting of sales evolution and operating income compared to a basket of competitors and of return on net assets compared with budget), each weighting for one third of the total number of awards granted; the awards vest over a three year service period (32% as of the first anniversary of the grant, 32% as of the second anniversary of the grant and 36% as of the third anniversary of the grant).

The table below summarizes grants under the outstanding stock award plans as authorized by the Compensation Committee:

 

 

                             
Date of grant                       Plan name   Number
of shares
granted		     Number
of shares
waived		     Number of shares
lost on performance
conditions		  

February 27, 2009

   2008 Employee Plan     50,400       —         (33,589 ) 

May 20, 2009

   2009 Supervisory Board     165,000       (7,500 )      —    

July 28, 2009

   2009 Employee Plan     5,575,240       —         (1,827,349 ) 

November 30, 2009

   2009 Employee Plan     8,300       —         (2,762 ) 

May 27, 2010

   2010 Supervisory Board     172,500       (7,500 )      —    

July 22, 2010

   2010 Employee Plan     6,344,725       —         (2,076,448 ) 

December 17, 2010

   2010 Employee Plan     221,650       —         (73,524 ) 

May 3, 2011

   2011 Supervisory Board     172,500       (30,000 )      —    

July 25, 2011

   2011 Employee Plan     5,881,630       —         (* ) 

November 14, 2011

   2011 Employee Plan     95,000       —         (* ) 

 

(*) As at December 31, 2011, a final determination of the achievement of the performance conditions had not yet been made by the Compensation Committee of the Supervisory Board.

A summary of the nonvested share activity by plan for the years ended December 31, 2011 is presented below:

 

 

                                                 

Nonvested Shares

   Outstanding
as at
December 31,
2010		     Granted     Forfeited /
waived		     Cancelled on
failed vesting
conditions		     Vested     Outstanding as at
December 31,
2011		  

2008 Employee Plan

     628,510       —         (3,531 )      —         (624,979 )      —    

2009 Employee Plan

     2,774,056       —         (31,144 )      —         (1,485,874 )      1,257,038  

2010 Employee Plan

     6,506,820       —         (73,852 )      (2,149,972 )      (1,058,438 )      3,224,558  

2011 Employee Plan

     —         5,976,630       (30,815 )      —         —         5,945,815  

2008 Supervisory Board Plan

     42,500       —         —         —         (42,500 )      —    

2009 Supervisory Board Plan

     95,000       —         —         —         (60,000 )      35,000  

2010 Supervisory Board Plan

     150,000       —         —         —         (75,000 )      75,000  

2011 Supervisory Board Plan

     —         172,500       (30,000 )      —         —         142,500  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total

     10,196,886       6,149,130       (169,342 )      (2,149,972 )      (3,346,791 )      10,679,911  
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The grant date fair value of nonvested shares granted to employees under the 2008 Employee Plan was $10.59. The fair value of the nonvested shares granted reflected the market price of the shares at the date of the grant. On March 23, 2009, the Compensation Committee approved the statement that one performance condition was fully met. Consequently, the compensation expense recorded on the 2008 Employee Plan reflected one third of the awards granted fully vested, as far as the service condition was met.

The grant date fair value of nonvested shares granted to employees under the 2009 Employee Plan was $7.54. On the 2009 Employee Plan, the fair value of the nonvested shares granted reflected the market price of the shares at the date of the grant. On April 14, 2010, the Compensation Committee approved the statement that two performance conditions were fully met. Consequently, the compensation expense recorded on the 2009 Employee Plan reflects the statement that two thirds of the awards granted will fully vest, as far as the service condition is met.

The grant date fair value of nonvested shares granted to employees under the 2010 Employee Plan was $8.74. On the 2010 Employee Plan, the fair value of the nonvested shares granted reflected the market price of the shares at the date of the grant. On April 26, 2011, the Compensation Committee approved the statement that two performance conditions were fully met. Consequently, the compensation expense recorded on the 2010 Employee Plan reflects the statement that two thirds of the awards granted will fully vest, as far as the service condition is met.

 

The grant date fair value of nonvested shares granted to employees under the 2011 Employee Plan was $9.08. On the 2011 Employee Plan, the fair value of the nonvested shares granted reflected the market price of the shares at the date of the grant. Moreover, the Company estimates the number of awards expected to vest by assessing the probability of achieving the performance conditions. At December 31, 2011, a final determination of the achievement of the performance conditions had not yet been made by the Compensation Committee of the Supervisory Board. However, the Company has estimated that one third of the awards are expected to vest. Consequently, the compensation expense recorded for the 2011 Employee Plan reflects the vesting of one third of the awards granted, subject to the service condition being met. The assumption of the expected number of awards to be vested upon achievement of the performance conditions is subject to changes based on the final measurement of the conditions, which is expected to occur in the first quarter of 2012.

The following table illustrates the classification of pre-payroll tax and social contribution stock-based compensation expense included in the consolidated statements of income for the years ended December 31, 2011, December 31, 2010 and December 31, 2009, respectively:

 

 

                         
    December 31,
2011		     December 31,
2010		     December 31,
2009		  

Cost of sales

     5       6       7  

Selling, general and administrative

     16       18       19  

Research and development

     8       10       11  

Earnings (loss) on equity-method investments and gain on investment divestiture

     —         —         1  

Total pre-payroll tax and social contribution compensation

     29       34       38  

Compensation cost, excluding payroll tax and social contribution, capitalized as part of inventory was $2 million at December 31, 2011, and $2 million at December 31, 2010 and 2009. As of December 31, 2011 there was $23 million of total unrecognized compensation cost related to the grant of nonvested shares, which is expected to be recognized over a weighted average period of approximately 9.5 months.

The total deferred income tax expense recognized in the consolidated statement of income related to unvested share-based compensation expense amounted to $7 million for the year ended December 31, 2011. The total deferred income tax benefit recognized in the consolidated statements of income related to unvested share-based compensation expense amounted to $3 million and $8 million for the years ended December 31, 2010 and 2009, respectively. In 2010, the total deferred income tax expense included a shortfall, recorded on the 2007 Employee Plan closed during 2010 due to the vesting fair value being significantly lower than the grant fair value.

16.6 Accumulated other comprehensive income (loss) attributable to parent company stockholders

The accumulated balances related to each component of Other comprehensive income (loss) were as follows:

 

 

                                         
   

Foreign

currency

translation

adjustment

    

Unrealized

gain (loss)

on securities,
net of tax

     Unrealized gain
(loss) on
derivatives, net
of tax		     Unrealized gain
(loss) on
defined benefit
pension plans,
net of tax		    

Accumulated

other

comprehensive

income (loss)

  

Balance as of December 31, 2008

     1,164       (16 )      11       (65 )      1,094  

Other comprehensive income (loss)

     61       10       (5 )      4       70  

Balance as of December 31, 2009

     1,224       (6 )      6       (60 )      1,164  

Other comprehensive income (loss)

     (255 )      28       55       (13 )      (185 ) 

Balance as of December 31, 2010

     969       22       61       (73 )      979  

Other comprehensive income (loss)

     (101 )      (32 )      (116 )      (60 )      (309 ) 

Balance as of December 31, 2011

     868       (10 )      (55 )      (133 )      670  

For the year ended December 31, 2011, the net amount of accumulated other comprehensive income reclassified as earnings was approximately $61 million related to cash flow hedge transactions outstanding as at December 31, 2010, for which the forecasted hedged transactions occurred in 2011.

16.7 Dividends

At the Company’s Annual General Meeting of Shareholders held on May 3, 2011, the distribution of a cash dividend of $0.40 per common share, amounting to approximately $354 million, to be paid in four equal installments, was adopted by the Company’s shareholders. Through December 31, 2011, three installments were paid for an amount of $266 million including withholding tax. The remaining $0.10 per share cash dividend to be paid in the first quarter of 2012 totaled $88 million and was reported as “Dividends payable to stockholders” on the consolidated balance sheet as at December 31, 2011.

At the Company’s Annual General Meeting of Shareholders held on May 25, 2010, the distribution of a cash dividend of $0.28 per common share, amounting to approximately $247 million, to be paid in four equal installments, was adopted by the Company’s shareholders. Through December 31, 2010, three installments were paid for an amount of $186 million including withholding tax. The remaining $0.07 per share cash dividend to be paid in the first quarter of 2011 totaled $62 million and was reported as “Dividends payable to stockholders” on the consolidated balance sheet as at December 31, 2010.

In 2009 the cash dividend was of $0.12 per share for a total amount paid of $105 million.