Progress Energy 2004 Annual Report Download - page 83

OTHER STOCK-BASED COMPENSATION PLANS
The Company has additional compensation plans for
officers and key employees of the Company that are stock-
based in whole or in part. The two primary active
stock-based compensation programs are the Performance
Share Sub-Plan (PSSP) and the Restricted Stock Awards
program (RSA), both of which were established pursuant to
the Company’s 1997 Equity Incentive Plan and were
continued under the Company’s 2002 Equity Incentive Plan,
as amended and restated as of July 10, 2002.
Under the terms of the PSSP, officers and key employees
of the Company are granted performance shares on an
annual basis that vest over a three-year consecutive
period. Each performance share has a value that is equal
to, and changes with, the value of a share of the
Company’s common stock, and dividend equivalents are
accrued on, and reinvested in, the performance shares.
The PSSP has two equally weighted performance
measures, both of which are based on the Company’s
results as compared to a peer group of utilities.
Compensation expense is recognized over the vesting
period based on the expected ultimate cash payout and
is reduced by any forfeitures. Effective January 1, 2005,
new awards granted pursuant to the PSSP will be
payable in Company common stock rather than in cash.
The RSA program allows the Company to grant shares of
restricted common stock to officers and key employees of
the Company. The restricted shares generally vest on a
graded vesting schedule over a minimum of three years.
Compensation expense, which is based on the fair value
of common stock at the grant date, is recognized over the
applicable vesting period, with corresponding increases
in common stock equity. The weighted-average price of
restricted shares at the grant date was $46.95, $39.53 and
$44.27 in 2004, 2003 and 2002, respectively. Compensation
expense is reduced by any forfeitures. Restricted shares
are not included as shares outstanding in the basic
earnings per share calculation until the shares are no
longer forfeitable. Changes in restricted stock shares
outstanding were:
The total amount expensed for other stock-based
compensation plans was $10 million, $27 million and
$17 million in 2004, 2003 and 2002, respectively.
C. Earnings Per Common Share
Basic earnings per common share is based on the
weighted-average number of common shares
outstanding. Diluted earnings per share includes the
effect of the nonvested portion of restricted stock awards
and the effect of stock options outstanding.
A reconciliation of the weighted-average number of
common shares outstanding for basic and dilutive
purposes is as follows:
81
Progress Energy Annual Report 2004
2004 2003 2002
Beginning balance 944,883 950,180 674,511
Granted 154,500 180,200 365,920
Vested (367,107) (151,677) (75,200)
Forfeited (87,100) (33,820) (15,051)
Ending balance 645,176 944,883 950,180
(in millions) 2004 2003 2002
Weighted-average common
shares – basic 242.2 237.2 217.2
Restricted stock awards .8 1.0 .8
Stock options .1 –.2
Weighted-average shares –
fully diluted 243.1 238.2 218.2
2004 2003 2002
(option quantities in millions)
Number of
Options
Weighted-
Average
Exercise
Price
Number of
Options
Weighted-
Average
Exercise
Price
Number of
Options
Weighted-
Average
Exercise
Price
Options outstanding, January 1 8.0 $43.54 5.2 $42.84 2.3 $43.49
Granted –– 3.0 $44.70 2.9 $42.34
Forfeited (0.1) $43.76 (0.1) $43.64 – $43.71
Canceled (0.1) $43.67 (0.1) $43.62 – –
Exercised (0.4) $42.82 – $43.00 – –
Options outstanding, December 31 7.4 $43.57 8.0 $43.54 5.2 $42.84
Options exercisable, December 31 with a remaining
contractual life of 7.6 years 4.6 $43.35 2.4 $43.09 0.8 $43.49
Weighted-average grant date fair value of options
granted during the year –$7.16 $6.83