Vectren 2012 Annual Report Download - page 103

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101
respectively. The total fair value of equity awards vesting during the year ended December 31, 2012, 2011, and 2010 was $0.1
million, $0.2 million, $0.2 million, respectively.
Stock Option Plans
In the past, option awards were granted to executives and other key employees with an exercise price equal to the market price
of the Company’s stock at the date of grant; those option awards generally required 3 years of continuous service and have 10-
year contractual terms. These awards generally vested on a pro-rata basis over 3 years. The last option grant occurred in
2005, and the Company does not intend to issue options in the future. All compensation cost has been recognized. A summary
of the status of the Company’s stock option awards as of December 31, 2012, and changes during the year ended
December 31, 2012, follows:
Weighted average Aggregate
Shares
Exercise
Price
Remaining
Contractual
Term (years)
Intrinsic
Value
(In millions)
Outstanding at January 1, 2012 407,633 $ 25.74
Exercised (21,068) $ 23.18
Outstanding at December 31, 2012 386,565 $ 25.88 1.6 $ 1.4
Exercisable at December 31, 2012 386,565 $ 25.88 1.6 $ 1.4
The total intrinsic value of options exercised during the year ended December 31, 2012 , 2011, and 2010 was $0.1 million, $2.4
million, and $1.3 million respectively. The actual tax benefit realized for tax deductions from option exercises was approximately
$0.1 million , $1.0 million, and $0.5 million in 2012 , 2011, and 2010, respectively.
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, 2012 , 2011, and 2010 the Company received cash upon exercise of stock
options totaling approximately $0.3 million , $12.3 million, and $9.5 million respectively. During these periods, the Company
repurchased shares totaling approximately $0.1 million , $12.8 million, and $1.2 million respectively.
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 share-based compensation. 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, 2012
and 2011, the liability associated with these plans totaled $22.9 million and $21.1 million, respectively. Other than $1.3 million
and $0.7 million which are classified in Accrued liabilities at December 31, 2012 and 2011, respectively, the liability is included in
Deferred credits & other liabilities. The impact of these plans on Other operating expenses was expense of $1.7 million in 2012,
$2.1 million in 2011 and $2.3 million in 2010. The amount recorded in earnings related to the investment activities in Vectren
phantom stock associated with these plans during the years ended December 31, 2012, 2011, and 2010, was a cost of $0.6
million, $1.7 million and $1.6 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 $29.1 million and $27.3 million at December 31, 2012 and 2011,
respectively. Earnings from those investments, which are recorded in Other-net, were earnings of $1.8 million in 2012, $0.1
million in 2011, and $1.9 million in 2010.