Vectren 2010 Annual Report Download - page 98

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of the status of the Company’s stock option awards as of December 31, 2010, and changes during the year ended December
31, 2010, follows:
Weighted average Aggregate
Remaining Intrinsic
Shares Exercise Contractual Value
Price Term (years) (In millions)
Outstanding at January 1, 2010 1,329,562 23.97$
Exercised (398,182) 22.62$
Forfeited or expired (1,574) 25.39$
Outstanding at December 31, 2010 929,806 24.55$
2.7 1.1$
Exercisable at December 31, 2010 929,806 24.55$ 2.7 1.1$
The total intrinsic value of options exercised during the year ended December 31, 2010 and 2008 was $1.3 million and $0.5
million, respectively. The actual tax benefit realized for tax deductions from option exercises was approximately $0.5 million in
2010 and $0.1 million in 2008.
The Company periodically issues new shares and also from time to time repurchases shares to satisfy share option exercises.
During the year ended December 31, 2010, the Company received cash upon exercise of stock options totaling approximately
$9.5 million. During this period, the Company repurchased shares totaling approximately $1.2 million. During 2008, the
Company received cash upon exercise of stock options totaling approximately $1.9 million and repurchased shares totaling
approximately $2.2 million. During the year ended December 31, 2009, stock option activity was insignificant.
The fair value of option awards granted in prior years was estimated on the date of grant using a Black-Scholes option valuation
model. Expected volatilities were based on historical volatility of the Company’s stock and other factors. The Company used
historical data to estimate the expected term and forfeiture patterns of the options. The risk-free rate for periods within the
contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant.
Deferred Compensation Plans
The Company has nonqualified deferred compensation plans, which permit eligible executives and non-employee directors to
defer portions of their compensation and vested restricted stock or units. A record keeping account is established for each
participant, and the participant chooses from a variety of measurement funds for the deemed investment of their accounts. The
measurement funds are similar to the funds in the Company's defined contribution plan and include an investment in phantom
stock units of the Company. The account balance fluctuates with the investment returns on those funds. At December 31, 2010
and 2009, the liability associated with these plans totaled $19.1 million and $22.8 million, respectively. Other than $0.5 million
and $6.6 million which are classified in Accrued liabilities at December 31, 2010 and 2009, respectively, the liability is included
in Deferred credits & other liabilities. The impact of these plans on Other operating expenses was expense of $2.3 million in
2010, $0.8 million in 2009 and income of $2.6 million in 2008. The amount recorded in earnings related to the investment
activities in Vectren phantom stock associated with these plans during the years ended December 31, 2010, 2009, and 2008,
was a cost of $1.6 million, a benefit of $1.5 million and a cost of $0.6 million, respectively.
The Company has certain investments currently funded primarily through corporate-owned life insurance policies. These
investments, which are consolidated, are available to pay deferred compensation benefits. These investments are also subject
to the claims of the Company's creditors. The cash surrender value of these policies included in Other corporate & utility
investments on the Consolidated Balance Sheets were $27.5 million and $24.7 million at December 31, 2010 and 2009,
respectively. Earnings from those investments, which are recorded in Other-net, were earnings $1.9 million in 2010, earnings of
$4.1 million in 2008, and a loss of $2.8 million in 2008.