9. Shares and Stockholders’ Equity

Common and Preferred Shares

The changes in our preferred and common stock (number of shares) were as follows:



	For the Three Months Ended March 31,
	2013	2012
Series A Preferred Stock
Balance as of beginning-of-period	9,532	10,072
Conversion of convertible preferred stock⁽¹⁾	-	(440)
Balance as of end-of-period	9,532	9,632

Common Stock
Balance as of beginning-of-period	271,402,586	291,319,222
Conversion of convertible preferred stock⁽¹⁾	-	7,040
Stock compensation/issued for benefit plans	427,429	104,197
Retirement/cancellation of shares	(3,372,457)	(6,018,156)
Balance as of end-of-period	268,457,558	285,412,303

Common Stock as of End-of-Period
Assuming conversion of preferred stock	268,610,070	285,566,415
Diluted basis	277,230,360	292,953,914

⁽¹⁾ Represents the conversion of Series A preferred stock into common stock.

Our common and Series A preferred stocks are without par value.

Average Shares

A reconciliation of the denominator (number of shares) in the calculations of basic and diluted earnings (loss) per common share was as follows:



	For the Three Months Ended March 31,
	2013	2012
Weighted-average shares, as used in basic calculation	270,265,766	289,055,925
Shares to cover exercise of outstanding warrants	10,150,108	10,150,271
Shares to cover conversion of preferred stock	152,512	154,499
Shares to cover non-vested stock	1,282,721	1,010,689
Average stock options outstanding during the period	1,726,615	601,284
Assumed acquisition of shares with assumed proceeds from exercising outstanding warrants	(3,630,023)	(4,634,542)
Assumed acquisition of shares with assumed proceeds and benefits from exercising stock options (at average market price for the period)	(1,272,272)	(413,777)
Shares repurchaseable from measured but unrecognized stock option expense	(83,328)	(14,681)
Weighted-average shares, as used in diluted calculation	278,592,099	295,909,668

In the event the average market price of LNC common stock exceeds the issue price of stock options and the options have a dilutive effect to our earnings per share (“EPS”), such options will be shown in the table above.

The income used in the calculation of our diluted EPS is our net income (loss) reduced by preferred stock dividends.

Accumulated OCI (“AOCI”)

The following summarizes the components and changes in accumulated OCI (in millions):



	For the Three Months Ended March 31,
	2013		2012
Unrealized Gain (Loss) on AFS Securities
Balance as of beginning-of-year	$	4,066	$	2,947
Unrealized holding gains (losses) arising during the period		(732)		(109)
Change in foreign currency exchange rate adjustment		(13)		10
Change in DAC, VOBA, DSI, future contract benefits and other contract holder funds		286		76
Income tax benefit (expense)		161		(27)
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(6)		(57)
Associated amortization of DAC, VOBA, DSI and DFEL		(8)		2
Income tax benefit (expense)		5		19
Balance as of end-of-period	$	3,777	$	2,933
Unrealized OTTI on AFS Securities
Balance as of beginning-of-year	$	(107)	$	(109)
(Increases) attributable to:
Gross OTTI recognized in OCI during the period		(7)		(58)
Change in DAC, VOBA, DSI and DFEL		1		8
Income tax benefit (expense)		2		18
Decreases attributable to:
Sales, maturities or other settlements of AFS securities		43		39
Change in DAC, VOBA, DSI and DFEL		(5)		(4)
Income tax benefit (expense)		(14)		(12)
Balance as of end-of-period	$	(87)	$	(118)
Unrealized Gain (Loss) on Derivative Instruments
Balance as of beginning-of-year	$	163	$	119
Unrealized holding gains (losses) arising during the period		48		(42)
Change in foreign currency exchange rate adjustment		11		(9)
Change in DAC, VOBA, DSI and DFEL		2		4
Income tax benefit (expense)		(22)		15
Less:
Reclassification adjustment for gains (losses) included in net income (loss)		(2)		(3)
Associated amortization of DAC, VOBA, DSI and DFEL		1		-
Income tax benefit (expense)		-		1
Balance as of end-of-period	$	203	$	89
Foreign Currency Translation Adjustment
Balance as of beginning-of-year	$	(4)	$	1
Foreign currency translation adjustment arising during the period		(3)		(5)
Income tax benefit (expense)		1		2
Balance as of end-of-period	$	(6)	$	(2)
Funded Status of Employee Benefit Plans
Balance as of beginning-of-year	$	(310)	$	(278)
Adjustment arising during the period		6		(2)
Income tax benefit (expense)		(2)		1
Balance as of end-of-period	$	(306)	$	(279)

The following summarizes the reclassifications out of AOCI (in millions) for the three months ended March 31, 2013, and the affected line item in the Consolidated Statements of Comprehensive Income (Loss):



Unrealized Gain (Loss) on AFS Securities
Gross reclassification	$	(6)	Total realized gain (loss)
Change in DAC, VOBA, DSI, and DFEL		(8)	Total realized gain (loss)
Reclassification before income tax benefit (expense)		(14)	Income (loss) from continuing operations before taxes
Income tax benefit (expense)		5	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(9)	Net income (loss)

Unrealized OTTI on AFS Securities
Gross reclassification	$	43	Total realized gain (loss)
Change in DAC, VOBA, DSI, and DFEL		(5)	Total realized gain (loss)
Reclassification before income tax benefit (expense)		38	Income (loss) from continuing operations before taxes
Income tax benefit (expense)		(14)	Federal income tax expense (benefit)
Reclassification, net of income tax	$	24	Net income (loss)

Unrealized Gain (Loss) on Derivative Instruments
Gross reclassifications:
Interest rate contracts	$	(5)	Net investment income
Interest rate contracts		1	Interest and debt expense
Foreign currency contracts		2	Net investment income
Total gross reclassifications		(2)
Change in DAC, VOBA, DSI, and DFEL		1	Commissions and other expenses
Reclassifications before income tax benefit (expense)		(1)	Income (loss) from continuing operations before taxes
Income tax benefit (expense)		-	Federal income tax expense (benefit)
Reclassification, net of income tax	$	(1)	Net income (loss)