Annual report pursuant to Section 13 and 15(d)

Mack-Cali Realty Corporation Stockholders' Equity

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Mack-Cali Realty Corporation Stockholders' Equity
 12 Months Ended
Dec. 31, 2011
Mack-Cali Realty Corporation Stockholders' Equity [Abstract]  
Mack-Cali Realty Corporation Stockholders' Equity
15.  
MACK-CALI REALTY CORPORATION STOCKHOLDERS' EQUITY

To maintain its qualification as a REIT, not more than 50 percent in value of the outstanding shares of the Company may be owned, directly or indirectly, by five or fewer individuals at any time during the last half of any taxable year of the Company, other than its initial taxable year (defined to include certain entities), applying certain constructive ownership rules.  To help ensure that the Company will not fail this test, the Company's Charter provides, among other things, certain restrictions on the transfer of common stock to prevent further concentration of stock ownership.  Moreover, to evidence compliance with these requirements, the Company must maintain records that disclose the actual ownership of its outstanding common stock and demands written statements each year from the holders of record of designated percentages of its common stock requesting the disclosure of the beneficial owners of such common stock.

PREFERRED STOCK
The Company had 10,000 shares of eight-percent Series C cumulative redeemable perpetual preferred stock issued and outstanding ("Series C Preferred Stock") in the form of 1,000,000 depositary shares ($25 stated value per depositary share).  Each depositary share represented 1/100th of a share of Series C Preferred Stock.

The Series C Preferred Stock had preference rights with respect to liquidation and distributions over the common stock. Holders of the Series C Preferred Stock, except under certain limited conditions, were not entitled to vote on any matters. In the event of a cumulative arrearage equal to six quarterly dividends, holders of the Series C Preferred Stock would have the right to elect two additional members to serve on the Company's Board of Directors until dividends have been paid in full.  At December 31, 2011, there were no dividends in arrears.  The Series C Preferred Stock was essentially on an equivalent basis in priority with the preferred units of the Operating Partnership (See Note 16: Noncontrolling interests in subsidiaries).
 
On October 28, 2011, the Company redeemed its Series C Preferred Stock, at a price of $2,500 per share, plus accrued and unpaid dividends through the date prior to the redemption date.  The write off of preferred stock issuance costs of $164,000 is included in preferred stock dividends for the year ended December 31, 2011.

COMMON STOCK
On February 18, 2011, the Company completed a public offering of 7,187,500 shares of common stock and used the net proceeds, which totaled approximately $227.4 million (after offering costs) primarily to repay borrowings under its unsecured revolving credit facility.

SHARE REPURCHASE PROGRAM
On September 12, 2007, the Board of Directors authorized an increase to the Company's repurchase program under which the Company was permitted to purchase up to $150 million of the Company's outstanding common stock ("Repurchase Program").  The Company has purchased and retired 2,893,630 shares of its outstanding common stock for an aggregate cost of approximately $104 million through December 31, 2011 under the Repurchase Program (none of which has occurred in 2010 and 2011).  The Company has a remaining authorization to repurchase up to an additional $46 million of its outstanding common stock, which it may repurchase from time to time in open market transactions at prevailing prices or through privately negotiated transactions.

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has a Dividend Reinvestment and Stock Purchase Plan (the "DRIP") which commenced in March 1999 under which 5.5 million shares of the Company's common stock have been reserved for future issuance.  The DRIP provides for automatic reinvestment of all or a portion of a participant's dividends from the Company's shares of common stock.  The DRIP also permits participants to make optional cash investments up to $5,000 a month without restriction and, if the Company waives this limit, for additional amounts subject to certain restrictions and other conditions set forth in the DRIP prospectus filed as part of the Company's effective registration statement on Form S-3 filed with the Securities and Exchange Commission ("SEC") for the 5.5 million shares of the Company's common stock reserved for issuance under the DRIP.

STOCK OPTION PLANS
In May 2004, the Company established the 2004 Incentive Stock Plan under which a total of 2,500,000 shares have been reserved for issuance.  No options have been granted through December 31, 2011 under this plan.  In September 2000, the Company established the 2000 Employee Stock Option Plan ("2000 Employee Plan") and the Amended and Restated 2000 Director Stock Option Plan ("2000 Director Plan").  In May 2002, shareholders of the Company approved amendments to both plans to increase the total shares reserved for issuance under both of the 2000 plans from 2,700,000 to 4,350,000 shares of the Company's common stock (from 2,500,000 to 4,000,000 shares under the 2000 Employee Plan and from 200,000 to 350,000 shares under the 2000 Director Plan).  In 1994, and as subsequently amended, the Company established the Mack-Cali Employee Stock Option Plan ("Employee Plan") and the Mack-Cali Director Stock Option Plan ("Director Plan") under which a total of 5,380,188 shares (subject to adjustment) of the Company's common stock had been reserved for issuance (4,980,188 shares under the Employee Plan and 400,000 shares under the Director Plan).  As the Employee Plan and Director Plan expired in 2004, and the 2000 Employee Plan and 2000 Director Plan expired in September 2010, stock options may no longer be issued under those plans.  Stock options granted under the Employee Plan in 1994 and 1995 became exercisable over a three-year period.  Stock options granted under the 2000 Employee Plan and those options granted subsequent to 1995 under the Employee Plan became exercisable over a five-year period. All stock options granted under both the 2000 Director Plan and Director Plan became exercisable in one year.  All options were granted at the fair market value at the dates of grant and have terms of ten years.  As of December 31, 2011 and 2010, the stock options outstanding, which were all exercisable, had a weighted average remaining contractual life of approximately 0.9 and 1.7 years, respectively.
 
Information regarding the Company's stock option plans is summarized below:

   
Weighted
Aggregate
 
Shares
Average
Intrinsic
 
Under
Exercise
Value
 
Options
Price
$(000's)
Outstanding at January 1, 2009
395,541
$28.77
  
Exercised
(18,917)
$26.66
  
Lapsed or canceled
(24,440)
$30.89
  
Outstanding at December 31, 2009
352,184
$28.74
  
Exercised
(55,508)
$27.10
  
Lapsed or canceled
(1,000)
$26.75
  
Outstanding at December 31, 2010 ($26.31 – $45.47)
295,676
$29.05
$ 1,186
Exercised
(107,806)
$28.27
  
Lapsed or canceled
(4,000)
$28.80
  
Outstanding at December 31, 2011 ($28.47 – $45.47)
183,870
$29.51
--
Options exercisable at December 31, 2010
295,676
  
$ 1,186
Options exercisable at December 31, 2011
183,870
  
--
Available for grant at December 31, 2010
2,425,073
    
Available for grant at December 31, 2011
2,343,337
    

Cash received from options exercised under all stock option plans was $3.0 million, $1.5 million and $504,000 for the years ended December 31, 2011, 2010 and 2009 respectively.  The total intrinsic value of options exercised during the years ended December 31, 2011, 2010 and 2009 was $496,000, $349,000 and $123,000, respectively.  The Company has a policy of issuing new shares to satisfy stock option exercises.

The Company recognized no stock options expense for the years ended December 31, 2011, 2010 and 2009, respectively. As of December 31, 2011, the Company had $2.8 million of total unrecognized compensation cost related to unvested stock compensation granted under the Company's stock compensation plans.  That cost is expected to be recognized over a weighted average period of one year.

STOCK COMPENSATION
The Company has issued stock awards ("Restricted Stock Awards") to officers, certain other employees, and nonemployee members of the Board of Directors of the Company, which allow the holders to each receive a certain amount of shares of the Company's common stock generally over a one to seven-year vesting period, of which 187,447 unvested shares were outstanding at December 31, 2011.  Of the outstanding Restricted Stock Awards issued to executive officers and senior management, 98,524 are contingent upon the Company meeting certain performance goals to be set by the Executive Compensation and Option Committee of the Board of Directors of the Company each year, with the remaining based on time and service. All Restricted Stock Awards provided to the officers and certain other employees were issued under the 2004 Incentive Stock Plan, 2000 Employee Plan and the Employee Plan. Restricted Stock Awards provided to directors were issued under the 2004 Incentive Stock Plan and the 2000 Director Plan.
 
Information regarding the Restricted Stock Awards is summarized below:

   
Weighted-Average
   
Grant – Date
 
Shares
Fair Value
Outstanding at January 1, 2009
375,006
$  34.46
Granted (a)
83,337
$  32.27
Vested
(132,255)
$  27.55
Forfeited
(3,000)
$  49.61
Outstanding at December 31, 2009
323,088
$  36.58
Granted (b)
111,127
$  32.10
Vested
(170,978)
$  34.74
Forfeited
(23,478)
$  35.70
Outstanding at December 31, 2010
239,759
$  35.90
Granted (c)
81,736
$  25.38
Vested
(134,048)
$  32.39
Outstanding at December 31, 2011
187,447
$  33.82
   
(a)   Included in the 83,337 Restricted Stock Awards granted in 2009 were 61,667 awards granted to the Company's five executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas, Michael Grossman and Mark Yeager.
(b)   Included in the 111,127 Restricted Stock Awards granted in 2010 were 51,970 awards granted to the Company's four executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas and Michael Grossman.
(c)   Included in the 81,736 Restricted Stock Awards granted in 2011 were 51,970 awards granted to the Company's four executive officers, Mitchell E. Hersh, Barry Lefkowitz, Roger W. Thomas and Michael Grossman.

DEFERRED STOCK COMPENSATION PLAN FOR DIRECTORS
The Amended and Restated Deferred Compensation Plan for Directors, which commenced January 1, 1999, allows non-employee directors of the Company to elect to defer up to 100 percent of their annual retainer fee into deferred stock units.  The deferred stock units are convertible into an equal number of shares of common stock upon the directors' termination of service from the Board of Directors or a change in control of the Company, as defined in the plan.  Deferred stock units are credited to each director quarterly using the closing price of the Company's common stock on the applicable dividend record date for the respective quarter.  Each participating director's account is also credited for an equivalent amount of deferred stock units based on the dividend rate for each quarter.

During the years ended December 31, 2011, 2010 and 2009, 14,886, 12,563 and 15,082 deferred stock units were earned, respectively.  As of December 31, 2011 and 2010, there were 98,009 and 84,236 director stock units outstanding, respectively.

EARNINGS PER SHARE
Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period.  Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.

The following information presents the Company's results for the years ended December 31, 2011, 2010 and 2009 in accordance with ASC 260, Earning Per Share: (dollars in thousands)

   
Year Ended December 31,
  
Computation of Basic EPS
  
2011
    
2010
    
2009
  
Income from continuing operations
   $ 81,387     $ 58,750     $ 80,308  
Add:     Noncontrolling interest in consolidated joint ventures
     402       262       943  
Deduct:  Noncontrolling interest in Operating Partnership
     (10,369 )     (8,133 )     (12,550 )
Deduct:  Preferred stock dividends
     (1,736 )     (2,000 )     (2,000 )
Income from continuing operations available to common shareholders
     69,684       48,879       66,701  
Income (loss) from discontinued operations available to common
                        
   shareholders
     --       4,021       (14,133 )
Net income available to common shareholders
   $ 69,684     $ 52,900     $ 52,568  
                         
Weighted average common shares
     86,047       79,224       74,318  
                         
Basic EPS:
                        
Income from continuing operations available to common shareholders
   $ 0.81     $ 0.62     $ 0.90  
Income (loss) from discontinued operations available to common
                        
   shareholders
     --       0.05       (0.19 )
Net income available to common shareholders
   $ 0.81     $ 0.67     $ 0.71  


   
Year Ended December 31,
  
Computation of Diluted EPS
  
2011
    
2010
    
2009
  
Income from continuing operations available to common shareholders
   $ 69,684     $ 48,879     $ 66,701  
Add:         Noncontrolling interest in Operating Partnership
     10,369       8,133       12,550  
Income from continuing operations for diluted earnings per share
     80,053       57,012       79,251  
Income (loss) from discontinued operations for diluted earnings
                        
   per share
     --       4,689       (16,580 )
Net income available to common shareholders
   $ 80,053     $ 61,701     $ 62,671  
                         
Weighted average common shares
     98,962       92,477       88,389  
                         
Diluted EPS:
                        
Income from continuing operations available to common shareholders
   $ 0.81     $ 0.62     $ 0.90  
Income (loss) from discontinued operations available to common
                        
   shareholders
     --       0.05       (0.19 )
Net income available to common shareholders
   $ 0.81     $ 0.67     $ 0.71  


The following schedule reconciles the shares used in the basic EPS calculation to the shares used in the diluted EPS calculation: (in thousands)

 
Year Ended December 31,
 
2011
2010
2009
Basic EPS shares
86,047
79,224
74,318
Add:Operating Partnership – common units
12,808
13,149
14,028
Stock options
18
44
1
Restricted Stock Awards
89
60
42
Diluted EPS Shares
98,962
92,477
88,389

Not included in the computations of diluted EPS were 15,000, 15,000 and 307,184 stock options as such securities were anti-dilutive during the years ended December 31, 2011, 2010 and 2009, respectively.  Unvested restricted stock outstanding as of December 31, 2011, 2010 and 2009 were 187,447, 239,759 and 323,088, respectively.

Dividends declared per common share for each of the years ended December 31, 2011, 2010 and 2009 was $1.80 per share.