Allegheny Power 2015 Annual Report Download - page 105

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88
Restrictedcommonstock(restrictedstock)activityfortheyearendedDecember31,2015,wasasfollows:

RestrictedStock
Numberof
Shares
Weighted
Average
GrantDate
FairValue
NonvestedasofJanuary1,2015 342,286
$ 45.29
Grantedin2015 65,434
32.98
Forfeitedin2015 (26,079)
57.58
Vestedin2015(1)(190,985) 43.17
NonvestedasofDecember31,2015 190,656
$ 40.65
(1)Excludes52,872sharesfordividendsearnedduringvestingperiod
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Theweightedaveragevestingperiodforrestrictedstockgrantedin2015was5.59years.Theweightedaveragefairvalueofawards
grantedin2015,2014,and2013were$32.98,$32.71and$42.53respectively.FortheyearsendedDecember31,2015,2014,and
2013,thefairvalueofrestrictedstockvestedwas$8million,$4million,and$7million,respectively.AsofDecember31,2015,there
was$3millionoftotalunrecognizedcompensationcostrelatedtononvestedrestrictedstock,whichisexpectedtoberecognized
overaperiodofapproximatelythreeyears.
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StockOptions
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Stockoptionshavebeengrantedtocertainemployeesallowingthemtopurchaseaspecifiednumberofcommonsharesatafixed
exercisepriceoveradefinedperiodoftime.Stockoptionsgenerallyexpiretenyearsfromthedateofgrant.Therewerenostock
optionsgrantedin2015.Stockoptionactivityduring2015wasasfollows:
StockOptionActivity
Numberof
Shares
Weighted
Average
Exercise
Price
Balance,January1,2015(1,077,988optionsexercisable) 1,439,145
$ 44.83
Optionsexercised (18,551)
29.53
Optionsforfeited (8,623)
68.02
Balance,December31,2015(1,211,358optionsexercisable) 1,411,971
$ 44.89
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Cashreceivedfromtheexerciseofstockoptionsin2015,2014and2013was$1million,$1millionand$19million,respectively.The
totalintrinsicvalueofoptionsexercisedduring2015wasnotmaterial.Theweightedaverageremainingcontractualtermofoptions
outstandingasofDecember31,2015was3.58years.
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PerformanceShares
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Priortothe2015grantofperformancebasedrestrictedstockunitsdiscussedabove,theCompanygrantedperformanceshares.
Performancesharesareshareequivalentsanddonothavevotingrights.Theperformancesharesoutstandingtracktheperformance
ofFE'scommonstockoverathreeyearvestingperiod.Dividendequivalentsaccrueonperformancesharesandarereinvestedinto
additionalperformanceshareswiththesameperformanceconditions.Thefinalaccountvaluemaybeadjustedbasedontheranking
ofFEstockperformancetoacompositeofpeercompanies.Noperformancesharesweregrantedin2015.In2014,$3millioncash
waspaidtosettleperformanceshareobligations.During2015and2013,nocashwaspaidtosettleperformancesharesduetothe
performancecriterianotbeingmetforthepreviousthreeyearvestingperiod.
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401(k)SavingsPlan
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In2015and2014,1,072,494and756,412sharesofFEcommonstock,respectively,wereissuedandcontributedtoparticipants'
accounts.In2013,approximately708,000sharesofFEcommonstockwerepurchasedonthemarketandcontributedtoparticipants’
accounts.
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89
EDCP
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UndertheEDCP,coveredemployeescandeferaportionoftheircompensation,includingbasesalary,annualincentiveawards
and/orlongtermincentiveawards,intounfundedaccounts.AnnualincentiveandlongtermincentiveawardsmaybedeferredinFE
stockaccounts.Basesalaryandannualincentiveawardsmaybedeferredintoaretirementcashaccountwhichearnsinterest.
Dividendsarecalculatedquarterlyonstockunitsoutstandingandarecreditedintheformofadditionalstockunits.Theformofpayout
asstockorcashcanvarydependingupontheformoftheaward,thedurationofthedeferralandotherfactors.Certaintypesof
deferralssuchasdividendequivalentunits,ShortTermIncentiveAwards,andperformanceshareawardsarerequiredtobepaidin
cash.Until2015,payoutsofthestockaccountstypicallyoccurredthreeyearsfromthedateofdeferral,althoughparticipantscould
haveelectedtodefertheirsharesintoaretirementstockaccountthatwouldpayoutincashuponretirement.In2015,FirstEnergy
amendedtheEDCPtoeliminatetherighttoreceivedeferredsharesafterthreeyears,effectivefordeferralsmadeonorafter
November1,2015.Awardsdeferredintoaretirementstockaccountwillpayoutincashuponseparationfromservice,deathor
disability.Interestaccruesonthecashallocatedtotheretirementcashaccountandthebalancewillpayoutincashoveratime
periodaselectedbytheparticipant.
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DCPD
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UndertheDCPD,membersoftheBoardofDirectorscanelecttoallocatealloraportionoftheirequityretainerstodeferredstock
andtheircashretainers,meetingfeesandchairfeestodeferredstockordeferredcashaccounts.Thenetliabilityrecognizedfor
DCPDofapproximately$9millionand$8millionasofDecember31,2015andDecember31,2014,respectively,isincludedinthe
caption“Retirementbenefits”ontheConsolidatedBalanceSheets.
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5.TAXES
FirstEnergyrecordsincometaxesinaccordancewiththeliabilitymethodofaccounting.Deferredincometaxesreflectthenettax
effectof temporarydifferencesbetween thecarryingamountsofassetsandliabilitiesforfinancialreportingpurposesand the
amountsrecognizedfortaxpurposes.Investmenttaxcredits,whichweredeferredwhenutilized,arebeingamortizedoverthe
recoveryperiodoftherelatedproperty.Deferredincometaxliabilitiesrelatedtotemporarytaxandaccountingbasisdifferencesand
taxcreditcarryforwarditemsarerecognizedatthestatutoryincometaxratesineffectwhentheliabilitiesareexpectedtobepaid.
Deferredtaxassetsarerecognizedbasedonincometaxratesexpectedtobeineffectwhentheyaresettled.

FESandtheUtilitiesarepartytoanintercompanyincometaxallocationagreementwithFirstEnergyanditsothersubsidiariesthat
providesfortheallocationofconsolidatedtaxliabilities.NettaxbenefitsattributabletoFirstEnergy,excludinganytaxbenefitsderived
frominterestexpenseassociatedwithacquisitionindebtednessfromthemergerwithGPU,arereallocatedtothesubsidiariesof
FirstEnergythathavetaxableincome.Thatallocationisaccountedforasacapitalcontributiontothecompanyreceivingthetax
benefit.

OnDecember18,2015,thePresidentsignedintolawtheProtectingAmericansfromTaxHikesActof2015(theAct).TheAct,among
otherthings,madepermanenttheR&Dtaxcredit,andalsoextendedaccelerateddepreciationofqualifiedcapitalinvestmentsplaced
intoservice.Thisbonusdepreciationprovisionis50%forqualifyingassetsplacedintoservicefrom2015through2017,40%for
qualifyingassetsplacedintoservicein2018and30%forqualifyingassetsplacedintoservicein2019.FirstEnergyandFESrecorded
theeffectsoftheActthatapplyto2015inthefourthquarterof2015.Theextensionofthetaxbenefitsdidnothaveasignificant
impacttotheeffectivetaxrate.
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