Vectren 2008 Annual Report Download - page 93

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13. Share-Based Compensation
The Company has various share-based compensation programs to encourage executives, key non-officer
employees, and non-employee directors to remain with the Company and to more closely align their interests with
those of the Company’s shareholders. Under these programs, the Company issues stock options, non-vested shares
(herein referred to as restricted stock), and restricted stock units. All share-based compensation programs are
shareholder approved. In addition, the Company maintains a deferred compensation plan for executives and non-
employee directors where participants have the option to invest earned compensation and vested restricted stock
and restricted units in phantom stock units. Certain option and share awards provide for accelerated vesting if there
is a change in control or upon the participant’s retirement.
Following is a reconciliation of the total cost associated with share-based awards recognized in the Company’s
financial statements to its after tax effect on net income:
Year ended December 31,
(in millions) 2008 2007 2006
Total cost of share-based compensation 3.7$ 2.5$ 3.2$
Less capitalized cost 0.9 0.5 0.9
Total in other operating expense 2.8 2.0 2.3
Less income tax benefit in earnings 1.1 0.8 0.6
After tax effect of share-based compensation 1.7$ 1.2$ 1.7$
Restricted Stock and Restricted Stock Unit Related Matters
The Company periodically grants restricted stock and/or restricted stock units to executives and other key non-
officer employees. The vesting of those grants is contingent upon meeting a total return and/or return on equity
performance objectives. In addition non-employee directors receive a portion of their fees in restricted stock.
Grants to executives and key non-officer employees generally vest at the end of a four-year period, with
performance measured at the end of the third year. Based on that performance, awards could double or could be
entirely forfeited. Awards to non-employee directors are not performance based and generally vest over one year.
Because executives and non-employee directors have the choice of settling awards in shares, cash, or deferring their
receipt into a deferred compensation plan (where the value is eventually withdrawn in cash), these awards are
accounted for as liability awards at their settlement date fair value. Awards to key non-officer employees must be
settled in shares and are therefore accounted for in equity at their grant date fair value.
A summary of the status of the Company’s restricted stock and restricted unit awards separated between those
accounted for as liabilities and equity as of December 31, 2008, and changes during the year ended December 31,
2008, follows:
Equity Awards
Wtd. Avg.
Grant Date Liability Awards
Shares Fair value Shares/Units Fair value
Restricted at January 1, 2008 21,870 28.11$ 351,888
Granted 16,695 28.66$ 190,832
Vested - -$ (14,688)
Forfeited (2,330) 28.52$ (3,639)
Restricted at December 31, 2008 36,235 28.24$ 524,393 25.01$
As of December 31, 2008, there was $5.8 million of total unrecognized compensation cost related to restricted
stock awards. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair
value of shares vested for awards to executives and non-employee directors (Liability Awards) during the years
ended December 31, 2008, 2007, and 2006, was $0.4 million, $1.9 million, and $1.8 million, respectively. No
awards to key non-officer employees (Equity Awards) vested in 2008 or 2006. The total fair value of shares vested
for awards to key non-officer employees during the year ended December 31, 2007, was $0.1 million.