Xcel Energy 2006 Annual Report Download - page 92

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Range of Exercise Prices
$15.94 to $26.00 $26.01 to $30.00 $30.01 to $51.25
Options outstanding and exercisable:
Number outstanding and exercisable.................................. 3,761,931 6,865,031 1,747,251
Weighted average remaining contractual life (years)...................... 3.8 3.1 2.7
Weighted average exercise price..................................... $ 23.44 $ 27.02 $ 37.16
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 10,481 shares of restricted stock in 2006 when the grant-date market price was
$19.10. 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. Compensation expense related to these
awards was not material.
On March 28, 2003, 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 performance share award is entirely dependent on a single measure, the TSR. Xcel Energy’s TSR is 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. The 2003 performance share award met the TSR as of Dec. 31, 2005.
Approximately 0.4 million shares were issued in February 2006 after approximately 0.3 million shares were withheld for tax purposes
and $8 million was settled in cash.
The TSR related to the restricted stock units 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 restrictions lapsed on the
restricted stock units, and Xcel Energy issued approximately 1.6 million shares of common stock after approximately 0.9 million
shares were withheld for tax purposes.
On Jan. 2, 2004, Xcel Energy granted 836,186 restricted stock units and performance shares under the Xcel Energy Inc. Omnibus
Incentive Plan. The grant-date market price used to calculate the TSR for this grant is $17.03. On Aug. 2, 2006, the restrictions lapsed
on the restricted stock units, and Xcel Energy issued approximately 0.4 million shares of common stock after approximately 0.2
million shares were withheld for tax purposes. The 2004 performance share award met the TSR as of Dec. 31, 2006 and will be settled
in shares and cash in February 2007.
On Jan. 1, 2005, Xcel Energy granted 519,362 restricted stock units and 323,889 performance shares 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 MW 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. The 2005 environmental restricted stock
units met their target as of Dec. 31, 2006 and will be settled in shares in February 2007.
Xcel Energy granted approximately 542,000 and 653,000 restricted stock units and performance shares under the Xcel Energy Inc.
Omnibus Incentive Plan in 2007 and 2006, respectively.
SFAS No. 123 (Revised 2004) — “Share Based Payment” (SFAS No. 123R) — In December 2004, the FASB issued SFAS
No. 123R related to equity-based compensation. This statement replaces the original SFAS No. 123 — “Accounting for Stock-Based
Compensation.” Under SFAS No. 123R, companies are no longer allowed to account for their share-based payment awards using the
intrinsic value method, which did not require any expense to be recorded on stock options granted with an equal to or greater than fair