Xcel Energy 2005 Annual Report Download - page 59

Activity in stock options was as follows for the years ended Dec. 31:
2005 2004 2003
Average Average Average
(Awards in thousands) Awards Price Awards Price Awards Price
Outstanding beginning of year 14,606 $26.67 15,614 $26.49 16,981 $26.29
Exercised (152) $17.30 (45) $15.08 (190) $12.21
Forfeited (213) $26.84 (172) $25.10 (580) $28.48
Expired (665) $23.71 (791) $24.08 (597) $23.41
Outstanding at end of year 13,576 $26.92 14,606 $26.67 15,614 $26.49
Exercisable at end of year 13,529 $26.91 10,096 $26.58 9,358 $25.59
Range of Exercise Prices
$13.81 to $25.50 $25.51 to $27.00 $27.01 to $51.25
Options outstanding:
Number outstanding 2,613,302 7,001,694 3,960,810
Weighted average remaining contractual life (years) 2.9 4.4 4.4
Weighted average exercise price $20.44 $26.28 $32.31
Options exercisable:
Number exercisable 2,613,302 7,001,694 3,913,810
Weighted average exercise price $20.44 $26.28 $32.33
Certain employees also may elect to receive shares of common or restricted stock under the Xcel Energy Inc. Executive Annual Incentive
Award Plan. Restricted stock vests in equal annual installments over a three-year period from the date of grant. Xcel Energy reinvests dividends
on the restricted stock it holds while restrictions are in place. Restrictions also apply to the additional shares of restricted stock acquired
through dividend reinvestment. Restricted stock has a value equal to the market-trading price of Xcel Energy’s stock at the grant date.
Xcel Energy granted 28,626 shares of restricted stock in 2005 when the grant-date market price was $17.81. Xcel Energy granted 65,090 shares
of restricted stock in 2004 when the grant-date market price was $17.40. Xcel Energy did not grant any shares of restricted stock in 2003.
Compensation expense related to these awards was not significant.
On March 28, 2003, the governance, compensation and nominating committee of Xcel Energy’s board of directors granted restricted stock
units and performance shares under the Xcel Energy Inc. Omnibus Incentive Plan approved by the shareholders in 2000. Restrictions on the
restricted stock units lapse upon the achievement of a 27-percent total shareholder return (TSR) for 10 consecutive business days and other
criteria relating to Xcel Energy’s common equity ratio. Under no circumstances will the restrictions lapse until one year after the grant date.
TSR is measured using the market price per share of Xcel Energy common stock, which at the grant date was $12.93, plus common dividends
declared after grant date. The TSR was met in the fourth quarter of 2003, and approximately $31 million of compensation expense was recorded
at Dec. 31, 2003. The remaining cost of $10 million related to the 2003 restricted stock units was recorded in the first quarter of 2004. In
January 2004, Xcel Energy’s board of directors approved the repurchase of up to 2.5 million shares of common stock to fulfill the requirements
of the restricted stock unit exercise. On March 29, 2004, the restricted stock units lapsed, and Xcel Energy issued approximately 1.6 million
shares of common stock.
The performance share award is entirely dependent on a single measure, the TSR. Xcel Energy’s TSR will be measured over a three-year period.
Xcel Energy’s TSR is compared to the TSR of other companies in the Edison Electric Institute’s Electrics Index. At the end of the three-year
period, potential payouts of the performance shares range from 0 percent to 200 percent, depending on Xcel Energy’s TSR compared to the
peer group.
On Dec. 9, 2003, the governance, compensation and nominating committee of Xcel Energy’s board of directors approved restricted stock
units and performance shares under the Xcel Energy Inc. Omnibus Incentive Plan. On Jan. 2, 2004, Xcel Energy granted 836,186 restricted
stock units and performance shares. The grant-date market price used to calculate the TSR for this grant is $17.03.
On Dec. 14, 2004, the governance, compensation and nominating committee of Xcel Energy’s board of directors granted restricted stock units
under the Xcel Energy Inc. Omnibus Incentive Plan. Payout of the units and the lapsing of restrictions on the transfer of units are based on two
separate performance criteria. A portion of the awarded units plus associated earned dividend equivalents will be settled, and the restricted
period will lapse after Xcel Energy achieves a specified earnings per share growth (adjusted for corporate-owned life insurance) measured
against year-end earnings per share (adjusted for corporate-owned life insurance). Additionally, Xcel Energy’s annual dividend paid on its
common stock must remain at $0.83 per share or greater. Earnings per share growth will be measured annually at the end of each fiscal year.
However, in no event will the restrictions lapse prior to two years after the date of grant. The remaining awarded units plus associated earned
dividend equivalents will be settled, and the restricted period will lapse after the average of actual performance results (adjusted for actual
megawatt hours) for the three components of an environmental index measured as a percentage of target performance meets or exceeds
100 percent. The environmental index will be measured annually at the end of each fiscal year. However, in no event will the restrictions lapse
prior to two years after the date of grant. If the performance criteria have not been met within four years of the date of grant, all associated
units shall be forfeited. On Jan. 1, 2005, Xcel Energy granted 519,362 restricted stock units.
On Dec. 14, 2004, the governance, compensation and nominating committee of Xcel Energy’s board of directors approved performance shares
under the Xcel Energy Inc. Omnibus Incentive Plan. On Jan. 1, 2005, Xcel Energy granted 323,889 performance shares.
XCEL ENERGY 2005 ANNUAL REPORT 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS