Annual report pursuant to Section 13 and 15(d)

SHAREHOLDERS' EQUITY

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

NOTE 15. SHAREHOLDERS' EQUITY

Preferred and Preference Stock

        We are authorized to issue one million shares each of zero par value preferred and preference stock with preferred shares being senior to preference shares. We can determine the number of shares of each series, and the rights, preferences and limitations of each series. At December 31, 2012, there was no preferred or preference stock outstanding.

Common Stock

        Changes in shares of common stock, treasury stock and common stock held in trust for employee benefit plans are as follows:

In millions
   Common
Stock		   Treasury
Stock		   Common Stock
Held in Trust		  

Balance at December 31, 2009

     222.0     20.7     3.0  

Shares acquired

     —     3.5     —  

Shares issued

     0.2     (0.2 )   —  

Employee benefits trust activity

     —     —     (0.9 )

Other shareholder transactions

     (0.4 )   —     —  
               

Balance at December 31, 2010

     221.8     24.0     2.1  
               

Shares acquired

     —     6.4     —  

Shares issued

     0.4     (0.2 )   —  

Employee benefits trust activity

     —     —     (0.3 )
               

Balance at December 31, 2011

     222.2     30.2     1.8  
               

Shares acquired

     —     2.6     —  

Shares issued

     0.4     (0.2 )   —  

Employee benefits trust activity

     —     —     (0.3 )

Other shareholder transactions

     (0.2 )   —     —  
               

Balance at December 31, 2012

     222.4     32.6     1.5  
               

Treasury Stock

        Shares of common stock repurchased by us are recorded at cost as treasury stock and result in a reduction of shareholders' equity in our Consolidated Balance Sheets. Treasury shares may be reissued as part of our stock-based compensation programs. When shares are reissued, we use the weighted-average cost method for determining cost. The gains between the cost of the shares and the issuance price are added to additional paid-in-capital. The losses are deducted from additional paid-in capital to the extent of the gains. Thereafter, the losses are deducted from retained earnings. Treasury stock activity for the three-year period ended December 31, 2012, consisting of shares issued and repurchased is presented in our Consolidated Statements of Changes in Equity.

        In February 2011, the Board of Directors approved a share repurchase program and authorized the acquisition of up to $1 billion of our common stock. In 2012, we made the following quarterly purchases under this plan:

In millions (except per share amounts)
For each quarter ended
  2012
Shares
Purchased		   Average Cost
Per Share		   Total Cost of
Repurchases		   Remaining
Authorized
Capacity		  

April 1

     0.1   $ 114.97   $ 8   $ 474  

July 1

     1.8     104.00     188     286  

September 30

     0.4     84.95     35     251  

December 31

     0.3     87.83     25     226  
                       

Total

     2.6     99.47   $ 256        
                       

        In December 2012, the Board of Directors authorized the acquisition of up to $1 billion of our common stock upon completion of the 2011 repurchase program.

Quarterly Dividends

        In July 2012, the Board of Directors authorized a 25 percent increase to our quarterly cash dividend on our common stock from $0.40 per share to $0.50 per share. In July 2011, the Board of Directors approved a 52 percent increase to our quarterly cash dividend on our common stock from $0.2625 per share to $0.40 per share. In July 2010, our Board of Directors approved a 50 percent increase in our quarterly cash dividend on our common stock from $0.175 per share to $0.2625 per share. Cash dividends per share paid to common shareholders for the last three years were as follows:

 
   Quarterly Dividends  
 
   2012   2011   2010  

First quarter

   $ 0.40   $ 0.2625   $ 0.175  

Second quarter

     0.40     0.2625     0.175  

Third quarter

     0.50     0.40     0.2625  

Fourth quarter

     0.50     0.40     0.2625  
               

Total

   $ 1.80   $ 1.325   $ 0.875  
               

        Total dividends paid to common shareholders in 2012, 2011 and 2010 were $340 million, $255 million and $172 million, respectively. Declaration and payment of dividends in the future depends upon our income and liquidity position, among other factors, and is subject to declaration by our Board of Directors, who meet quarterly to consider our dividend payment. We expect to fund dividend payments with cash from operations.

Employee Benefits Trust

        In 1997, we established the Employee Benefits Trust (EBT) funded with common stock for use in meeting our future obligations under employee benefit and compensation plans. The primary sources of cash for the EBT are dividends received on unallocated shares of our common stock held by the EBT. The EBT may be used to fund matching contributions to employee accounts in the 401(k) Retirement Savings Plan (RSP) made in proportion to employee contributions under the terms of the RSP. In addition, we may direct the trustee to sell shares of the EBT on the open market to fund other non-qualified employee benefit plans. Matching contributions charged to income for the years ended December 31, 2012, 2011 and 2010 were $27 million, $28 million and $21 million, respectively. EBT shares sold on the open market and proceeds from those sales for the years ended December 31, 2012, 2011 and 2010 were as follows:

In millions
   2012   2011   2010  

EBT shares sold on open market

     —     —     0.7  

Proceeds from sale

   $ —   $ —   $ 58