PG&E 2009 Annual Report Download - page 107

As of December 31, 2009, there was less than $1 million
of total unrecognized compensation cost related to
outstanding stock options. That cost is expected to be
recognized over a weighted average period of a year and a
half for PG&E Corporation.
Restricted Stock
During 2009, PG&E Corporation awarded 11,394 shares of
PG&E Corporation restricted common stock to eligible
participants of PG&E Corporation and its subsidiaries, of
which none were awarded to the Utility’s eligible
participants.
Although the recipients of restricted stock possess voting
rights, they may not sell or transfer their shares until the
shares vest. For restricted stock awarded in 2005, there were
no performance criteria and the restrictions lapsed ratably
over four years. The terms of the restricted stock awarded
in 2006, 2007, and 2008, provide that 60% of the shares
will vest over a period of three years at the rate of 20% per
year. If PG&E Corporation’s annual total shareholder
return (“TSR”) is in the top quartile of its comparator
group, as measured for the three immediately preceding
calendar years, the restrictions on the remaining 40% of the
shares will lapse in the third year. If PG&E Corporation’s
TSR is not in the top quartile for such period, then the
restrictions on the remaining 40% of the shares will lapse
in the fifth year. Compensation expense related to the
portion of the restricted stock award that is subject to
conditions based on TSR is recognized over the shorter of
the requisite service period and three years. Dividends
declared on restricted stock are paid to recipients only
when the restricted stock vests.
The tax benefit from restricted stock that vested during
2009, 2008, and 2007 totaled $1 million, $2 million, and
$7 million respectively, of which $0.5 million, $1 million,
and $5 million was recorded by the Utility.
The following table summarizes restricted stock activity
for PG&E Corporation and the Utility for 2009:
Number of
Shares of
Restricted
Stock
Weighted
Average
Grant-Date
Fair Value
Nonvested at January 1 1,287,569 $40.18
Granted 11,394 $33.02
Vested (616,647) $37.91
Forfeited (11,764) $37.47
Nonvested at December 31 670,552 $37.91
The following table summarizes restricted stock activity
for the Utility for 2009:
Number of
Shares of
Restricted
Stock
Weighted
Average
Grant-Date
Fair Value
Nonvested at January 1(1) 944,798 $40.20
Granted – –
Vested (460,137) $37.91
Forfeited (10,640) $37.47
Nonvested at December 31 474,021 $47.27
(1) Includes net employee transfers of 87,868 shares between PG&E
Corporation and the Utility during 2009.
As of December 31, 2009, there was $16 million of total
unrecognized compensation cost relating to restricted
stock, of which $14 million related to the Utility. The cost
is expected to be recognized over a weighted average period
of 0.78 years by PG&E Corporation and 0.77 years by the
Utility.
Restricted Stock Units
Beginning January 1, 2009, PG&E Corporation awarded
restricted stock units (“RSU”) instead of restricted stock as
permitted by the PG&E Corporation 2006 LTIP. RSUs are
hypothetical shares of stock that will generally vest in 20%
increments on the first business day of March in 2010,
2011, and 2012, with the remaining 40% vesting on the
first business day of March 2013. Each vested RSU is
settled for one share of PG&E Corporation common stock.
Additionally, upon settlement, RSU recipients receive
payment for the amount of dividend equivalents associated
with the vested RSUs that have accrued since the date of
grant.
Performance Shares
During 2009, PG&E Corporation awarded 3,096,277
performance shares to eligible participants of PG&E
Corporation and its subsidiaries, of which 2,335,637 shares
were awarded to the Utility’s eligible participants.
Performance shares are hypothetical shares of PG&E
Corporation common stock that vest at the end of a three-
year performance period and are settled in cash. Upon
vesting, the amount of cash that recipients are entitled to
receive, if any, is determined by multiplying the number of
vested performance shares by the average closing price of
PG&E Corporation common stock for the last 30 calendar
days of the last year in the three-year performance period.
This result is then adjusted by a payout percentage ranging
from 0% to 200% as measured by PG&E Corporation’s
TSR relative to its comparator group for the applicable
three-year performance period. During 2009, PG&E
Corporation paid $20.5 million to performance share
recipients, of which $14.6 million related to Utility
employees.
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