Eversource 2005 Annual Report Download - page 76

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or last day of each six-month period. Employees may purchase shares
having a value not exceeding 25 percent of their compensation as of the
beginning of the purchase period. During 2005 and 2004, employees
purchased 209,184 and 194,838 shares, respectively, at discounted
prices of $15.85 and $15.90 in 2005 and $14.17 and $15.90 in 2004.
At December 31, 2005 and 2004, 1,181,219 shares and 1,390,403
shares remained registered for future issuance under the ESPP,
respectively.
Effective February 1, 2006, the ESPP was amended to change the
discount rate to five percent of the market price and the pricing date
was changed to the last day of the purchase period. As a result, the
ESPP will qualify as a non-compensatory plan under SFAS No. 123R,
which is effective on January 1, 2006 for NU. This amendment may
also reduce the number of shares purchased under the ESPP.
Incentive Plans: Under the Incentive Plan, NU is authorized to grant various
types of awards, including restricted stock, performance units, restricted
stock units, and stock options to eligible employees and board members.
The number of shares that may be utilized for grants and awards during
agiven calendar year may not exceed the aggregate of one percent of
the total number of NU common shares outstanding as of the first day
of that calendar year and the shares not utilized in previous years. At
December 31, 2005 and 2004, NU had 906,154 and 1,361,528 shares
of common stock, respectively, registered for issuance under the
Incentive Plan.
Restricted Stock and Restricted Stock Units: NU granted 304,724 restricted
stock units during 2005 and 25,000 restricted shares and 382,395
restricted stock units during 2004. The restricted stock units granted
had a fair value of $5.8 million and $7.4 million in 2005 and 2004,
respectively. The restricted stock granted in 2004 had a fair value of
$0.4 million. NU currently accounts for restricted stock and restricted
stock units in accordance with APB No. 25 and amortizes the intrinsic
value of the stock at the award date over the related service period
using the straight-line method. Awards granted in 2005, 2004, and
2003 were subject to three and four-year graded vesting periods.
During 2005, 2004 and 2003, $4.3 million, $3.8 million and $2 million,
respectively, was expensed related to restricted stock and restricted
stock units.
Performance Units: Under the Incentive Plan, NU also granted 38,996,
30,122, and 35,303 performance units during 2005, 2004 and 2003,
respectively. The performance units are valued at $100 at target and
vest ratably over three years and will be paid in cash at the end of the
vesting period. NU records a liability for the performance units based
on the achievement of the performance unit goals. A liability of $2.9
million and $3.2 million, which is included in other current liabilities
on the accompanying consolidated balance sheets, was recorded at
December 31, 2005 and 2004, respectively, for these performance
units. During 2005, 2004 and 2003, $0.3 million, $1.7 million and $0.2
million, respectively, was recorded as an expense related to these
performance units.
Stock Options: Prior to 2003, NU granted stock options to certain
employees. The exercise price of stock options, as set at the time
of grant, was equal to the fair market value per share at the date of
grant, and therefore no equity-based compensation cost was reflected
in net income. A summary of stock option transactions is as follows:
Exercise Price Per Share
Options Range Weighted Average
Outstanding – December 31, 2002 3,837,309 $9.6250 — $22.2500 $16.8738
Exercised (562,982) $ 9.6250 — $19.5000 $14.6223
Forfeited and cancelled (151,005) $14.9375 — $21.0300 $19.0227
Outstanding – December 31, 2003 3,123,322 $ 9.6250 — $22.2500 $17.1270
Exercised (612,666) $ 9.6250 — $19.5000 $12.3181
Forfeited and cancelled (516,914) $16.5500 — $19.5000 $16.6139
Outstanding – December 31, 2004 1,993,742 $14.9375 — $22.2500 $18.7370
Exercised (368,192) $14.9375 — $20.0600 $12.7262
Forfeited and cancelled (503,009) $18.4375 — $21.0300 $18.1703
Outstanding – December 31, 2005 1,122,541 $14.9375 — $22.2500 $18.4484
Exercisable – December 31, 2003 2,027,413 $ 9.6250 — $22.2500 $16.6969
Exercisable – December 31, 2004 1,877,595 $14.9375 — $22.2500 $18.7778
Exercisable – December 31, 2005 1,122,541 $14.9375 — $22.2500 $18.4484
For certain options that were granted in 2002, the vesting schedule
for these options is ratably over three years from the date of grant.
Additionally,certain options granted in 2002 vest 50 percent at the
date of grant and 50 percent one year from the date of grant, while
other options granted in 2002 vest 100 percent after five years.
The fair value of each stock option grant has been estimated on the
date of grant using the Black-Scholes option pricing model and is used
to calculate the proforma net (loss)/income and EPS over the service
period, as disclosed in Note 1N, “Summaryof Significant Accounting
Policies – Equity-Based Compensation,” to the consolidated financial
statements. No stock options weregranted during 2005, 2004 or
2003. The weighted average remaining contractual lives for the options
outstanding at December 31, 2005 is 4.89 years.
For information regarding the adoption of SFAS No. 123R on January 1,
2006, equity-based compensation, see Note 1C, “Summaryof
Significant Accounting Policies – Accounting Standards Issued But Not
Yet Adopted,” to the consolidated financial statements.