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NU 2006 ANNUAL REPORT 79
period has not been completed. For prior periods, as permitted by
SFAS No. 123, “Accounting for Stock-Based Compensation,” and
related guidance, NU used the intrinsic value method and disclosed
the pro forma effects as if NU recorded equity-based compensation
under the fair value-based method.
Under SFAS No. 123(R), NU accounts for its various share-based plans
as follows:
• For grants of restricted shares and restricted share units (RSUs),
NU continues to record compensation expense over the vesting period
based upon the fair value of NU’s common stock at the date of
grant, but records this expense net of estimated forfeitures.
Previously, forfeitures were recorded as they occurred. Dividend
equivalents on RSUs, previously included in compensation expense,
are charged to retained earnings net of estimated forfeitures.
• NU has not granted any stock options since 2002, and no compensation
expense has been recorded. All options were fully vested prior to
January 1, 2006.
• For shares granted under the ESPP, an immaterial amount of
compensation expense was recorded in the first quarter of 2006,
and no compensation expense was recorded in the remainder of
2006 or will be recorded in futureperiods as a result of a plan
amendment that was effectiveon February 1, 2006.
Incentive Plan: Under the Incentive Plan, NU is authorized to grant
new shares for various types of awards, including restricted shares,
RSUs, performance units, and stock options to eligible employees and
board members. At December 31, 2006, the number of shares that
may be utilized for grants and awards during a given 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 plus the shares not utilized in previous years. At December 31,
2006 and 2005, NU had 570,494 and 906,154 shares of common stock,
respectively, registered for issuance under the Incentive Plan.
Restricted Shares and RSUs: NU has granted restricted shares under
the 2002, 2003 and 2004 incentive programs that are subject to three-
year and four-year graded vesting schedules. NU has granted RSUs
under the 2004, 2005 and 2006 incentive programs that are subject to
three-year and four-year graded vesting schedules. RSUs are paid in
shares plus cash sufficient to satisfy withholdings subsequent to
vesting. A summary of restricted share and RSU transactions for the
year ended December 31, 2006 is as follows:
Weighted
Weighted Total Remaining Average
AverageGrant – Date Compensation Remaining
Restricted Grant – Date Fair Value Cost Period
Restricted Shares Shares Fair Value (Millions) (Millions) (Years)
Outstanding at December 31, 2005 152,901 N/A
Granted ——
Vested (74,243) $14.52 $1.1
Forfeited (12,984) $14.14
Outstanding at December 31, 2006 65,674 $15.00 $1.0 $0.2 0.3
The per share and total weighted average grant date fair value for restricted shares vested was $14.60 and $1.4 million, respectively, for the year
ended December 31, 2005 and $14.84 and $1.9 million, respectively, for the year ended December 31, 2004.
The total compensation cost recognized for restricted shares was $0.6 million, net of taxes of approximately $0.4 million for the year ended
December 31, 2006, $0.7 million, net of taxes of approximately $0.4 million for the year ended December 31, 2005, and $0.9 million, net of taxes of
approximately $0.6 million for the year ended December 31, 2004.
Weighted
Weighted Total Remaining Average
AverageGrant – Date Compensation Remaining
RSUs Grant – Date Fair Value Cost Period
RSUs (Units) Fair Value (Millions) (Millions) (Years)
Outstanding at December 31, 2005 521,273 N/A
Granted 371,134 $19.87
Issued (120,166) $18.50 $ 2.2
Forfeited (56,942) $19.31
Outstanding at December 31, 2006 715,299 $19.41 $13.9 $6.5 1.8
The per share and total weighted average grant date fair value for RSUs granted was $18.89 and $5.8 million, respectively, for the year ended
December 31, 2005 and $19.07 and $7.3 million, respectively, for the year ended December 31, 2004. The weighted average grant date fair value per
share for RSUs issued was $19.06 and $18.65 for the years ended December 31, 2005 and 2004, respectively. The total weighted average fair value of
RSUs issued was $1.9 million for the year ended December 31, 2005. The total weighted average fair value of RSUs issued in 2004 was de minimis.
The total compensation cost recognized for RSUs was $2.8 million, net of taxes of approximately $1.9 million for the year ended December 31,
2006, $1.9 million, net of taxes of approximately $1.3 million for the year ended December 31, 2005, and $1.4 million, net of taxes of approximately
$1 million for the year ended December 31, 2004.