Progress Energy 2008 Annual Report Download - page 88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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The Restricted Stock Award program allows us to grant
shares of restricted common stock to our officers and
key employees. 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. Restricted shares are not included
as shares outstanding in the basic earnings per share
calculation until the shares are no longer forfeitable. A
summary of the status of the nonvested restricted stock
shares at December 31, 2008, and changes during the
year then ended, is presented below:
Number of
Restricted Shares Weighted-Average Grant Date Fair Value
Beginning balance 268,635 $43.77
Granted – –
Vested (71,134) 43.29
Forfeited (5,400) 44.63
Ending balance 192,101 43.93
For the years ended December 31, 2007 and 2006, the
weighted-average grant date fair value of restricted
stock granted was $49.54 and $44.51, respectively.
The total fair value of restricted stock awards vested
during the years ended December 31, 2008, 2007 and 2006
was $3 million, $13 million and $4 million, respectively.
Cash expended to purchase shares for the restricted
stock program totaled $8 million during the year ended
December 31, 2006. Cash expended to purchase shares for
2008 and 2007 was not significant due to the curtailment
of the Restricted Stock Award program and the rollout of
the new restricted stock unit (RSU) program.
Beginning in 2007, we began issuing RSUs rather than
restricted stock awards for our officers, vice presidents,
managers and key employees. RSUs awarded to eligible
employees are generally subject to either three- or five-
year cliff vesting or five-year graded vesting. We issue
new shares of common stock to satisfy the requirements
of the RSU program. Compensation expense, 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.
RSUs are not included as shares outstanding in the
basic earnings per share calculation until shares are no
longer forfeitable. Units are converted to shares upon
vesting. A summary of the status of nonvested RSUs at
December 31, 2008, and changes during the year then
ended, follows:
Number of
Restricted Units Weighted-Average Grant Date Fair Value
Beginning balance 824,458 $50.29
Granted 489,603 42.48
Vested (187,318) 46.67
Forfeited (50,207) 50.55
Ending balance 1,076,536 46.86
The total fair value of RSUs vested during the year
ended December 31, 2008, was $9 million. There were
no expenditures to purchase stock to satisfy RSU plan
obligations in 2008.
Our Consolidated Statements of Income included total
recognized expense for other stock-based compensation
plans of $31 million for the year ended December 31, 2008,
with a recognized tax benefit of $12 million. The total
expense recognized on our Consolidated Statements
of Income for other stock-based compensation
plans was $64 million with a recognized tax benefit of
$24 million and $25 million, with a recognized tax benefit
of $10 million, for the years ended December 31, 2007 and
2006, respectively. No compensation cost related to other
stock-based compensation plans was capitalized.
At December 31, 2008, there was $34 million of total
unrecognized compensation cost related to nonvested
other stock-based compensation plan awards, which
is expected to be recognized over a weighted-average
period of 1.57 years.
C. Earnings per Common Share
Basic earnings per common share are based on
the weighted-average number of common shares
outstanding. Diluted earnings per share include the
effects of the nonvested portion of restricted stock,
restricted stock unit awards and performance share
awards and the effect of stock options outstanding.
A reconciliation of the weighted-average number
of common shares outstanding for the years ended
December 31 for basic and dilutive purposes follows:
(in millions) 2008 2007 2006
Weighted-average common shares –
basic 260.3 256.1 250.4
Net effect of dilutive stock-based
compensation plans 0.5 0.6 0.4
Weighted-average shares – fully diluted 260.8 256.7 250.8