OG&E 2011 Annual Report Download - page 69

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The number of performance units granted based on total shareholder
return and the assumptions used to calculate the grant date fair value
of the performance units based on total shareholder return are shown
in the following table.
2011 2010 2009
Number of units granted 213,721 214,750 316,513
Fair value of units granted $÷÷46.09 $÷÷39.43 $÷÷25.55
Expected dividend yield 3.2% 3.9% 4.5%
Expected price volatility 33.0% 34.0% 31.0%
Risk-free interest rate 1.40% 1.42% 1.25%
Expected life of units (in years) 2.87 2.87 2.88
Performance Units – Earnings Per Share
The fair value of the performance units based on earnings per share is
based on grant date fair value which is equivalent to the price of one
share of the Company’s common stock on the date of grant. The fair
value of performance units based on earnings per share varies as the
number of performance units that will vest is based on the grant date
fair value of the units and the probable outcome of the performance
condition. The Company reassesses at each reporting date whether
achievement of the performance condition is probable and accrues
compensation expense if and when achievement of the performance
condition is probable. As a result, the compensation expense recog-
nized for these performance units can vary from period to period. There
are no post-vesting restrictions related to the Company’s performance
units based on earnings per share. The number of performance units
granted based on earnings per share and the grant date fair value are
shown in the following table.
2011 2010 2009
Number of units granted 71,238 71,585 105,504
Fair value of units granted $÷41.61 $÷32.44 $÷÷20.02
Restricted Stock
Under the 2008 Stock Incentive Plan and beginning in 2008, the Company
issued restricted stock to certain existing non-officer employees as well
as other executives upon hire to attract and retain individuals to be
competitive in the marketplace. The restricted stock vests in one-third
annual increments. Prior to vesting, each share of restricted stock is
subject to forfeiture if the recipient ceases to render substantial services
to the Company or a subsidiary for any reason other than death, disability
or retirement. These shares may not be sold, assigned, transferred or
pledged and are subject to a risk of forfeiture.
The fair value of the restricted stock was based on the closing market
price of the Company’s common stock on the grant date. Compensation
expense for the restricted stock is a fixed amount determined at the
grant date fair value and is recognized as services are rendered by
employees over a three-year vesting period. Also, the Company treats
its restricted stock as multiple separate awards by recording compen-
sation expense separately for each tranche whereby a substantial
portion of the expense is recognized in the earlier years in the requisite
service period. Dividends are accrued and paid during the vesting period
and, therefore, are included in the fair value calculation. The expected
life of the restricted stock is based on the non-vested period since
inception of the three-year award cycle. There are no post-vesting
restrictions related to the Company’s restricted stock. The number of
shares of restricted stock granted and the grant date fair value are
shown in the following table.
2011 2010 2009
Shares of restricted stock granted 17,902 26,653 6,226
Fair value of restricted stock granted $÷48.82 $÷40.78 $33.38
A summary of the activity for the Company’s non-vested performance
units and restricted stock at December 31, 2011 and changes in 2011
are shown in the following table.
OGE Energy Corp. 67
Performance Units
Total Shareholder Return Earnings Per Share Restricted Stock
Weighted- Weighted- Weighted-
Average Average Average
Number Grant Date Number Grant Date Number Grant Date
of Units Fair Value of Units Fair Value of Shares Fair Value
Units/shares non-vested at 12/31/10 507,154 $31.40 169,054 $25.26 47,739 $36.46
Granted 213,721 (A) $46.09 71,238 (A) $41.61 17,902 $48.82
Vested (291,294) $25.55 (97,099) $20.02 (28,397) $34.05
Forfeited (14,751) $40.53 (4,916) $34.91 – $÷÷÷«–
Units/shares non-vested at 12/31/11 414,830 $42.75 138,277 $37.01 37,244 $44.24
Units/shares expected to vest 357,974 119,325 37,244
(A) Represents target number of units granted. Actual number of units earned, if any, is dependent upon performance and may range from 0 percent to 200 percent of the target.