Progress Energy 2007 Annual Report Download - page 97

Progress Energy Annual Report 2007
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river terminals at which the synthetic fuels manufacturing
facilities are located. These assets had been reported
within our former Coal and Synthetic Fuels segment.
There were no impairments of long-lived assets in 2007.
B. Investments
We evaluate declines in value of investments under
the criteria of SFAS No. 115, “Accounting for Certain
Investments in Debt and Equity Securities” (SFAS No. 115),
and FASB Staff Position FAS 115-1/124-1, “The Meaning of
Other-Than-Temporary Impairments and Its Application to
Certain Investments” (See Note 1D). Declines in fair value
to below the cost basis judged to be other than temporary
on available-for-sale securities are included in long-term
regulatory liabilities on the Consolidated Balance Sheets
for securities held in our nuclear decommissioning trust
funds and in operation and maintenance expense and
other, net on the Consolidated Statements of Income
for securities in our benefit investment trusts and other
available-for-sale securities. See Note 13 for additional
information.
We continually review PEC’s affordable housing
investment (AHI) portfolio for impairment. There were no
other-than-temporary impairments in 2007. As a result
of various factors, including continued operating losses
of the AHI portfolio and management issues arising at
certain properties within the AHI portfolio, we recorded
impairment charges of $1 million on a pre-tax basis in both
2006 and 2005.
10. EQUITY
A. Common Stock
At December 31, 2007 and 2006, we had 500 million
shares of common stock authorized under our charter,
of which 260 million shares and 256 million shares,
respectively, were outstanding. During 2007, 2006 and
2005, respectively, we issued approximately 3.4 million,
4.2 million and 4.8 million shares of common stock,
resulting in approximately $151 million, $185 million and
$208 million in proceeds. Included in these amounts for
2007, 2006 and 2005, respectively, were approximately
1.0 million, 1.6 million and 4.6 million shares for proceeds
of approximately $46 million, $70 million and $199 million,
to meet the requirements of the Progress Energy 401(k)
Savings & Stock Ownership Plan (401(k)) and the Investor
Plus Stock Purchase Plan.
At December 31, 2007 and 2006, we had approximately
50 million shares and 54 million shares, respectively, of
common stock authorized by the board of directors that
remained unissued and reserved, primarily to satisfy
the requirements of our stock plans. In 2002, the board
of directors authorized meeting the requirements of
the 401(k) and the Investor Plus Stock Purchase Plan
with original issue shares. We continue to meet the
requirements of the restricted stock plan with issued and
outstanding shares.
There are various provisions limiting the use of retained
earnings for the payment of dividends under certain
circumstances. At December 31, 2007, there were no
significant restrictions on the use of retained earnings
(See Note 12).
B. Stock-Based Compensation
EMPLOYEE STOCK OWNERSHIP PLAN
We sponsor the 401(k) for which substantially all full-
time nonbargaining unit employees and certain part-
time nonbargaining unit employees within participating
subsidiaries are eligible. At December 31, 2007 and 2006,
participating subsidiaries were PEC, PEF, PVI, Progress
Fuels (corporate employees) and PESC. The 401(k), which
has matching and incentive goal features, encourages
systematic savings by employees and provides a method
of acquiring Progress Energy common stock and other
diverse investments. The 401(k), as amended in 1989, is
an Employee Stock Ownership Plan (ESOP) that can enter
into acquisition loans to acquire Progress Energy common
stock to satisfy 401(k) common share needs. Qualification
as an ESOP did not change the level of benefits received
by employees under the 401(k). Common stock acquired
with the proceeds of an ESOP loan is held by the 401(k)
Trustee in a suspense account. The common stock is
released from the suspense account and made available
for allocation to participants as the ESOP loan is repaid.
Such allocations are used to partially meet common stock
needs related to matching and incentive contributions
and/or reinvested dividends. All or a portion of the
dividends paid on ESOP suspense shares and on ESOP
shares allocated to participants may be used to repay
ESOP acquisition loans. Dividends that are used to repay
such loans, paid directly to participants or reinvested by
participants, are deductible for income tax purposes.
There were 1.7 million and 2.3 million ESOP suspense
shares at December 31, 2007 and 2006, respectively, with
a fair value of $82 million and $112 million, respectively.
ESOP shares allocated to plan participants totaled
10.6 million and 10.9 million at December 31, 2007 and
2006, respectively. Our matching and incentive goal
compensation cost under the 401(k) is determined based
on matching percentages and incentive goal attainment as