PG&E 2010 Annual Report Download - page 83

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Long-Term Incentive Plan (“2006 LTIP”), and 5,105,505
shares were issued for the accounts of participants in PG&E
Corporation’s 401(k) plan and Dividend Reinvestment and
Stock Purchase Plan (“DRSPP”). In addition, between
June 23 and June 29, 2010, PG&E Corporation issued
16,370,779 shares of common stock upon conversion of
the $247 million principal amount of Convertible
Subordinated Notes. (See Note 4 above.)
On November 4, 2010, PG&E Corporation entered into
an Equity Distribution Agreement pursuant to which
PG&E Corporation’s sales agents may offer and sell, from
time to time, PG&E Corporation common stock having an
aggregate gross offering price of up to $400 million. Sales
of the shares are made by means of ordinary brokers’
transactions on the New York Stock Exchange, or in such
other transactions as agreed upon by PG&E Corporation
and the sales agents and in conformance with applicable
securities laws. As of December 31, 2010, PG&E
Corporation had issued 2,357,796 shares of its common
stock pursuant to the Equity Distribution Agreement for
cash proceeds of $110 million, net of fees and commissions
paid of $1 million.
UTILITY
As of December 31, 2010, PG&E Corporation held all of
the Utility’s outstanding common stock.
DIVIDENDS
The Boards of Directors of PG&E Corporation and the
Utility have each adopted a dividend policy. Under the
Utility’s Articles of Incorporation, the Utility cannot pay
common stock dividends unless all cumulative preferred
dividends on the Utility’s preferred stock have been paid.
PG&E Corporation and the Utility each have revolving
credit facilities that require the company to maintain a
ratio of consolidated total debt to consolidated
capitalization of at most 65%. This covenant, along with
the CPUC’s requirement for the Utility to maintain the
52% equity component of its capital structure, are
considered to be restrictions on the payment of dividends.
Based on the calculation of these ratios for each company,
no amount of PG&E Corporation’s retained earnings and
$5.3 billion of the Utility’s retained earnings were restricted
at December 31, 2010.
In addition, the Utility was required to maintain at least
$9.7 billion of its net assets as equity in order to maintain
the capital structure of at least 52% equity at December 31,
2010. As a result, $9.7 billion of the Utility’s net assets are
restricted and may not be transferred to PG&E Corporation
in the form of cash dividends.
The Boards of Directors of PG&E Corporation and the
Utility declare dividends quarterly. On December 15, 2010,
the Board of Directors of PG&E Corporation declared a
quarterly dividend of $0.455 per share, totaling $183
million, which was paid on January 15, 2011 to
shareholders of record on December 31, 2010.
LONG-TERM INCENTIVE PLAN
The 2006 LTIP permits the award of various forms of
incentive awards, including stock options, stock
appreciation rights, restricted stock awards, restricted stock
units, performance shares, deferred compensation awards,
and other stock-based awards, to eligible employees of
PG&E Corporation and its subsidiaries. Non-employee
directors of PG&E Corporation are also eligible to receive
restricted stock and either stock options or restricted stock
units under the formula grant provisions of the 2006 LTIP.
A maximum of 12 million shares of PG&E Corporation
common stock (subject to adjustment for changes in capital
structure, stock dividends, or other similar events) has been
reserved for issuance under the 2006 LTIP, of which
7,856,348 shares were available for award at December 31,
2010.
Awards made under the PG&E Corporation LTIP before
December 31, 2005 and still outstanding continue to be
governed by the terms and conditions of the PG&E
Corporation LTIP.
PG&E Corporation and the Utility use an estimated
annual forfeiture rate of 2.5% for stock options and
restricted stock and 2% for performance shares, based on
historic forfeiture rates, for purposes of determining
compensation expense for share-based incentive awards.
The following table provides a summary of total
compensation expense for PG&E Corporation and the
Utility for share-based incentive awards for 2010, 2009, and
2008:
(in millions) 2010 2009 2008
Stock Options $– $– $2
Restricted Stock 14 922
Restricted Stock Units 911 –
Performance Shares:
Liability Awards 22 37 33
Equity Awards 11 ––
Total Compensation Expense
(pre-tax) $ 56 $57 $57
Total Compensation Expense
(after-tax) $ 33 $34 $34
There were no significant stock-based compensation
costs capitalized during 2010, 2009 and 2008. There was no
material difference between PG&E Corporation and the
Utility for the information disclosed above.
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