PG&E 2010 Annual Report Download - page 85

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As of December 31, 2010, there was less than $1 million
of total unrecognized compensation cost relating to
restricted stock.
Restricted Stock Units
Beginning January 1, 2009, PG&E Corporation primarily
awarded restricted stock units (“RSUs”) instead of restricted
stock as permitted by the 2006 LTIP. RSUs are
hypothetical shares of stock that will generally vest in 20%
increments on the first business day of March in year one,
two, and three, with the remaining 40% vesting on the first
business day of March in year four. 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.
The weighted average grant-date fair value per RSU
granted during 2010 and 2009 was $42.97 and $35.53,
respectively. The total fair value of RSUs that vested during
2010 and 2009 was $5 million and less than $1 million,
respectively. As of December 31, 2010, $21 million of total
unrecognized compensation costs related to nonvested
RSUs are expected to be recognized over the remaining
weighted average period of 2.70 years.
The following table summarizes RSU activity for 2010:
Number of
Restricted
Stock
Units
Weighted
Average
Grant-Date
Fair Value
Nonvested at January 1 664,992 $ 35.78
Granted 640,060 $ 42.97
Vested (125,651) $ 35.60
Forfeited (25,005) $ 37.61
Nonvested at December 31 1,154,396 $ 39.74
Performance Shares
On March 10, 2010, PG&E Corporation granted 605,275
contingent performance shares to eligible employees under
the 2006 LTIP. Unlike performance shares awarded in prior
periods (see below), which settle in cash, 2010 grants will
be settled in PG&E Corporation common stock and are
classified as share-based equity awards. Performance shares
granted and outstanding prior to 2010 will not be modified
and will continue to be paid and settled in cash. The
vesting of the performance shares granted in 2010 is
dependent upon three years of continuous service.
Additionally the amount of common stock that recipients
are entitled to receive, if any, will be determined based on
PG&E Corporation’s TSR relative to the performance of a
specified group of peer companies for the applicable three-
year performance period. Total compensation expense for
these shares is based on the grant-date fair value, which is
determined using a Monte Carlo simulation valuation
model. Performance share expense is recognized ratably
over the requisite service period based on the fair values
determined, except for the expense attributable to awards
granted to retirement-eligible participants, which is
recognized on the date of grant. Dividend equivalents on
equity-classified awards, if any, will be paid in cash upon
vesting date based on the amount of common stock
awarded.
For performance shares classified as equity awards, the
following table summarizes activity for 2010:
Number of
Performance
Shares
Weighted
Average
Grant-Date
Fair Value
Nonvested at January 1 –
Granted 616,990 $ 35.60
Vested –
Forfeited (7,020) $ 35.60
Nonvested at December 31 609,970 $ 35.60
As of December 31, 2010, $10 million of total
unrecognized compensation costs related to nonvested
performance shares are expected to be recognized over the
remaining weighted-average period of 1.22 years.
Prior to 2010, PG&E Corporation awarded performance
shares to eligible participants under the 2006 LTIP as
hypothetical shares of common stock that vest at the end
of a three-year period and are settled in cash based on the
performance of PG&E Corporation’s TSR. 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 in
the three-year performance period. This result is then
adjusted based on PG&E Corporation’s TSR relative to the
performance of a specified group of peer companies for the
applicable three-year performance period. These
outstanding performance shares are classified as a liability
because the performance shares can only be settled in cash.
During each reporting period compensation expense
recognized for performance shares will fluctuate based on
PG&E Corporation’s common stock price and its TSR
relative to its comparator group. As of December 31, 2010
and 2009, $68 million and $63 million, respectively, had
been accrued as the performance share liability for PG&E
Corporation.
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