Eversource 2006 Annual Report Download - page 82

80 NU 2006 ANNUAL REPORT
Stock Options: Prior to 2003, NU granted stock options to certain employees. These options were fully vested as of December 31, 2005. The fair
value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model. The weighted average remaining
contractual lives for the options outstanding at December 31, 2006 is 3.8 years. A summary of stock option transactions is as follows:
Exercise Price Per Share
Options Range Weighted Average Intrinsic Value
(Millions)
Outstanding – December 31, 2003 3,123,322 $ 9.6250 – $22.2500 $17.1270
Exercised (612,666) $12.3181 $ 3.2
Forfeited and cancelled (516,914) $16.6139
Outstanding – December 31, 2004 1,993,742 $14.9375 – $22.2500 $18.7370
Exercised (368,192) $12.7262 $ 0.7
Forfeited and cancelled (503,009) $18.1703
Outstanding and Exercisable – December 31, 2005 1,122,541 $14.9375 – $22.2500 $18.4484
Exercised (331,943) $18.3579 $ 2.0
Forfeited and cancelled (18,750) $20.8885
Outstanding and Exercisable – December 31, 2006 771,848 $14.9375 – $22.2500 $18.4245 $ 7.5
Exercisable – December 31, 2003 2,027,413 $16.6969
Exercisable – December 31, 2004 1,877,595 $18.7778
Asummary of the ranges of exercise prices of stock options outstanding
and exercisableas of December 31, 2006 is as follows:
Exercise Price Per Share
Options Range Weighted Average Contractual Term (Years)
156,516 $14.9375 – $16.6800 $15.6198 1.7
615,332 $16.6900 – $22.2500 $19.1380 4.3
771,848 $14.9375 – $22.2500 $18.4245 3.8
Cash received for options exercised during the years ended December
31, 2006 and 2005 totaled $6.1 million and $7.4 million, respectively.
The tax benefit realized from stock options exercised totaled $0.8
million and $0.3 million for the years ended December 31, 2006 and
2005, respectively.
Employee Share Purchase Plan: NU maintains an ESPP for all eligible
employees. Prior to February 1, 2006, NU common shares were
purchased by employees at six-month intervals at 85 percent of the
lower of the price on the first or last day of each six-month period.
Employees were permitted to purchase shares having a value not
exceeding 25 percent of their compensation as of the beginning of the
purchase period. Effective February 1, 2006, the ESPP was amended to
change the discount rate to 5 percent of the closing market price on
the last day of the purchase period. As a result, the ESPP qualifies as a
non-compensatory plan under SFAS No. 123(R), and no compensation
expense was or will be recorded for ESPP purchases.
During 2006 and 2005, employees purchased 113,404 and 209,184
shares, respectively, at discounted prices of $16.90 and $21.28 in 2006
and $15.85 and $15.90 in 2005. At December 31, 2006 and 2005,
1,067,815 shares and 1,181,219 shares remained registered for future
issuance under the ESPP, respectively.
Pro Forma Impact: The following table illustrates the pro forma
effect if NU had applied the recognition provisions of SFAS No. 123
to share-based compensation in 2005 and 2004:
(Millions of Dollars, except share information) For the Years Ended December 31,
2005 2004
Net (loss)/income as reported $(253.5) $116.6
Add: Equity-based employee
compensation expense included in the
reported net (loss)/income, net of
related tax effects 2.6 2.3
Net (loss)/income before equity-based
compensation (250.9) 118.9
Deduct: Total equity-based employee
compensation expense determined
under the fair value-based method for
all awards, net of related tax effects (1.2) (2.7)
Pro forma net (loss)/income (252.1) 116.2
EPS:
Basic and diluted – as reported $ (1.93) $ 0.91
Basic and diluted – pro forma $ (1.92) $ 0.91
The total equity-based employee compensation expense of $1.2 million
and $2.7 million above includes offsetting amounts of $2.2 million and
$0.7 million, related to forfeitures of stock options made for the years
ended December 31, 2005 and 2004, respectively.
An income tax rate of 40 percent is used to estimate the tax effect on
total share-based payments determined under the fair value-based
method for all awards.
E. Other Retirement Benefits
NU provides benefits for retirement and other benefits for certain
current and past company officers. The actuarially-determined liability
for these benefits which is included in deferred credits and other
liabilities – other on the accompanying consolidated balancesheets
was $46.5 million and $37.4 million at December 31, 2006 and 2005,
respectively. During 2006, 2005 and 2004, $5.6 million, $4.5 million and
$4.5 million, respectively, was expensed related to these benefits.