Earnings Per Share

12 Months Ended

Dec. 31, 2011

EARNINGS PER SHARE [Abstract]

4. EARNINGS PER SHARE

4. EARNINGS PER SHARE

Basic Earnings Per Share – Basic earnings per share amounts from both continuing and discontinued operations are calculated by dividing the respective earnings by the weighted-average number of shares of common stock outstanding during each period.

Diluted Earnings Per Share – Diluted earnings per share amounts include the dilutive effect of stock options and other stock awards granted to employees under stock-based compensation plans. The dilutive effect of these securities totaled 4.8 million, 4.2 million, and 4.1 million shares for the years ended December 31, 2011, 2010 and 2009, respectively. The weighted-average diluted shares outstanding for the years ended December 31, 2011, 2010, and 2009, exclude anti-dilutive stock options to purchase approximately 2.8 million, 2.8 million, and 8.1 million shares, respectively, because such options have exercise prices in excess of the average market price of the company’s common stock during the year.

Share Repurchases – The table below summarizes the company’s share repurchases beginning January 1, 2009:

			Amount			Average		Total Shares				Shares Repurchased
Repurchase Program			Authorized			Price		Retired		Date		(in millions)
Authorization Date	(in millions)			Per Share  (2)			(in millions)		Completed		2011		2010		2009
December 19, 2007		$	3,600		$	59.82		60.2		August 2010				15.7		23.1
June 16, 2010 (1)			4,245			57.42		44.2				40.2		4.0
												40.2		19.7		23.1

(1) On June 16, 2010, the company’s board of directors authorized a share repurchase program of up to $2 billion of the company’s common stock. On April 25, 2011, after the company had repurchased shares totaling $245 million, the company’s board of directors authorized an increase to the remaining share repurchase authorization to $4.0 billion. As of December 31, 2011, the company had $1.7 billion remaining under this authorization for share repurchases.

(2) Includes commissions paid and calculated as the average price per share under the respective repurchase program.

Under the June 16, 2010 authorization, the company entered into an accelerated share repurchase agreement with Goldman, Sachs & Co. (Goldman Sachs) on May 2, 2011, to repurchase 15.6 million shares of common stock at an initial price of $64.17 per share for a total of $1.0 billion. Under this agreement, Goldman Sachs immediately borrowed shares that were sold to and canceled by the company. Subsequently, Goldman Sachs began purchasing shares in the open market to settle its share borrowings. The cost of the company’s initial share repurchase was subject to adjustment based on the actual cost of the shares subsequently purchased by Goldman Sachs. On August 16, 2011, Goldman Sachs completed its share repurchases and paid the company a cash refund of $19 million for the final price adjustment, which was recorded as an adjustment to paid-in capital. The final average purchase price of the shares repurchased under the agreement was $62.54 per share, including commissions and certain other fees.

Additional share repurchases take place at management’s discretion or under pre-established, non-discretionary programs, depending on market conditions, in the open market, and in privately negotiated transactions. Under these programs, additional share repurchases took place during the year ended December 31, 2011. The company retires its common stock upon repurchase and has not made any purchases of common stock other than in connection with these publicly announced repurchase program authorizations. In connection with the spin-off of the Shipbuilding business, the company obtained a Private Letter Ruling (“PLR”) from the Internal Revenue Service that generally limits our share repurchases to approximately 88 million shares within two years of the spin-off (a maximum of 30 percent of outstanding shares at the time of the separation). Due to share repurchases subsequent to the spin-off, the remaining number of shares that we can repurchase under this share repurchase limitation as of December 31, 2011, was approximately 48 million shares. Cash available from unusual transactions, such as the disposition of significant assets, should they arise, can be used to repurchase additional shares.