Vectren 2012 Annual Report Download - page 102

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16. Share-Based Compensation & Deferred Compensation Arrangements
The Company has share-based compensation programs to encourage Company officers, 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 has in the past issued stock options and both performance-based and time-
based awards. All share-based compensation programs are shareholder approved. Currently, awards issued to officers of the
Company, which comprise a substantial majority of the awards issued, are performance-based, are settled in cash, and
dividends that accrue are also subject to performance measures. In addition, the Company maintains a deferred compensation
plan for executives and non-employee directors where participants can invest earned compensation and vested share-based
awards in phantom Company stock units, among other options. Certain vesting grants 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) 2012 2011 2010
Total cost of share-based compensation $ 6.3 $ 5.8 $ 4.9
Less capitalized cost 1.2 0.8 1.7
Total in other operating expense 5.1 5.0 3.2
Less income tax benefit in earnings 2.1 2.0 1.3
After tax effect of share-based compensation $ 3.0 $ 3.0 $ 1.9
Performance Based Awards & Other Awards
The vesting of awards issued to Company officers and other key non-officer employees is contingent upon meeting a total return
and/or return on equity performance objectives. Grants to Company officers 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. However, a limited number of awards have also been time-vested awards that vest
ratably over a three year period. In addition non-employee directors receive a portion of their fees in share based
awards. These awards to non-employee directors are not performance based and generally vest over one year. Because
Company officers and non-employee directors have the choice of settling awards in 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. Certain share 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 awards separated between those accounted for as liabilities and equity as of December 31, 2012,
and changes during the year ended December 31, 2012, follows:
Equity Awards
Wtd. Avg.
Grant Date Liability Awards
Shares Fair value Shares/Units Fair value
Awards at January 1, 2012 54,013 $ 25.22 698,110
Granted 35,458 29.82 250,211
Vested (2,635) 24.76 (149,374)
Forfeited (16,343) 25.12 (170,137)
Awards at December 31, 2012 70,493 $ 27.45 628,810 $ 29.40
As of December 31, 2012, there was $8.1 million of total unrecognized compensation cost associated with outstanding grants.
That cost is expected to be recognized over a weighted-average period of 1.9 years. The total fair value of shares vested for
liability awards during the years ended December 31, 2012, 2011, and 2010, was $4.4 million, $3.0 million, and $5.0 million,