10. EQUITY

A. COMMON STOCK

PROGRESS ENERGY

At December 31, 2011 and December 31, 2010, we had 500 million shares of common stock authorized under our charter, of which 295 million and 293 million shares were outstanding, respectively. We periodically issue shares of common stock through the Progress Energy 401(k) Savings & Stock Ownership Plan (401(k)), the Progress Energy Investor Plus Plan (IPP) and other benefit plans.

There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. At December 31, 2011, there were no significant restrictions on the use of retained earnings (See Note 2 and Note 12B).

The following table presents information for our common stock issuances for the years ended December 31:


		2011			2010			2009
(in millions)		Shares		Net Proceeds	Shares		Net Proceeds	Shares		Net Proceeds
Total issuances		2.0	$	53	12.2	$	434	17.5	$	623
Issuances under an underwritten public offering^(a)		-		-	-		-	14.4		523
Issuances through 401(k) and/or IPP		-		1	11.2		431	2.5		100

^(a)	The shares issued under an underwritten public offering were issued on January 12, 2009, at a public offering price of $37.50.

PEC

At December 31, 2011 and December 31, 2010, PEC was authorized to issue up to 200 million shares of common stock. All shares issued and outstanding are held by Progress Energy. There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. At December 31, 2011, there were no significant restrictions on the use of retained earnings. See Note 12B for additional dividend restrictions related to PEC.

PEF

At December 31, 2011 and December 31, 2010, PEF was authorized to issue up to 60 million shares of common stock. All PEF common shares issued and outstanding are indirectly held by Progress Energy. There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. At December 31, 2011, there were no significant restrictions on the use of retained earnings. See Note 12B for additional dividend restrictions related to PEF.

B. STOCK-BASED COMPENSATION

EMPLOYEE STOCK OWNERSHIP PLAN

We sponsor the 401(k) for which substantially all full-time nonbargaining unit employees and certain part-time nonbargaining unit employees within participating subsidiaries are eligible. The 401(k), which has a matching feature, encourages systematic savings by employees and provides a method of acquiring Progress Energy common stock and other diverse investments. The 401(k), as amended in 1989, is an Employee Stock Ownership Plan (ESOP) that can enter into acquisition loans to acquire Progress Energy common stock to satisfy 401(k) common share needs. Qualification as an ESOP did not change the level of benefits received by employees under the 401(k). Common stock acquired with the proceeds of an ESOP loan was held by the 401(k) Trustee in a suspense account. The common stock was released from the suspense account and made available for allocation to participants as the ESOP loan was repaid. Such allocations were used to partially meet common stock needs related to matching and incentive contributions and/or reinvested dividends. All or a portion of the dividends paid on ESOP suspense shares and on ESOP shares allocated to participants may be used to repay ESOP acquisition loans. Dividends that are used to repay such loans, paid directly to participants or reinvested by participants, are deductible for income tax purposes. By December 31, 2010, no ESOP suspense shares were outstanding and the ESOP acquisition loan was repaid.

ESOP shares allocated to plan participants totaled 13.4 million at December 31, 2010. Our matching compensation cost under the 401(k) is determined based on matching percentages as defined in the plan. Through December 31, 2010, such compensation cost was allocated to participants' accounts in the form of Progress Energy common stock. Beginning in 2011, such compensation cost was allocated to participants' accounts in the same investments and election percentages as the participants' contributions. In 2010, we met common stock share needs with open market purchases and with shares released from the ESOP suspense account. Matching costs met with shares released from the suspense account totaled $12 million for the years ended December 31, 2010 and 2009, respectively. In 2011, we met common stock share needs with open market purchases.

We also sponsor the Savings Plan for Employees of Florida Progress Corporation, which is an ESOP plan that covers bargaining unit employees of PEF.

Total matching cost for both plans was $44 million, $43 million and $41 million for the years ended December 31, 2011, 2010 and 2009, respectively.

PEC

PEC's matching costs met with shares released from the ESOP suspense account totaled $8 million for the years ended December 31, 2010 and 2009, respectively. Total matching cost was $23 million, $23 million and $22 million for the years ended December 31, 2011, 2010 and 2009, respectively.

PEF

PEF's matching costs met with shares released from the ESOP suspense account totaled $3 million and $4 million for the years ended December 31, 2010 and 2009, respectively. Total matching cost for both plans was $14 million, $14 million and $12 million for the years ended December 31, 2011, 2010 and 2009, respectively.

OTHER STOCK-BASED COMPENSATION PLANS

We have additional compensation plans for our officers and key employees that are stock-based in whole or in part. Our long-term compensation program currently includes two types of equity-based incentives: performance shares under the Performance Share Sub-Plan (PSSP) and restricted stock programs. The compensation program was established pursuant to our 1997 Equity Incentive Plan (EIP) and was continued under our 2002 and 2007 EIPs, as amended and restated from time to time. As authorized by the EIPs, we may grant up to 20 million shares of Progress Energy common stock through our long-term compensation program.

Beginning in 2009, shares issued under the redesigned PSSP use total shareholder return and earnings growth as two equally weighted performance measures. The outcome of the performance measures can result in an increase or decrease from the target number of performance shares granted. We distribute common stock shares to participants equivalent to the number of performance shares that ultimately vest. We issue new shares of common stock to satisfy the requirements of the PSSP program. Also, the fair value of the stock-settled award is generally established at the grant date based on the fair value of common stock on that date, with subsequent adjustments made to reflect the status of the performance measure. Compensation expense for all awards is reduced by estimated forfeitures. At December 31, 2011, there were an immaterial number of stock-settled performance target shares outstanding. The final number of shares issued will be dependent upon the outcome of the performance measures discussed above.

Beginning in 2007, we began issuing restricted stock units (RSUs) rather than the previously issued 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 three- 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 included as shares outstanding in the basic earnings per share calculation and are converted to shares upon vesting. At December 31, 2011, there were an immaterial number of RSUs outstanding.

The total fair value of RSUs vested during the years ended December 31, 2011, 2010 and 2009, was $24 million, $24 million and $16 million, respectively. No cash was expended to purchase stock to satisfy RSU plan obligations in 2011, 2010 and 2009. The RSUs vested during 2011 had a weighted-average grant date fair value of $39.16.

Our Consolidated Statements of Income included total recognized expense for other stock-based compensation plans of $33 million for the year ended December 31, 2011, with a recognized tax benefit of $13 million. The total expense recognized on our Consolidated Statements of Income for other stock-based compensation plans was $27 million, with a recognized tax benefit of $11 million, and $37 million, with a recognized tax benefit of $14 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

At December 31, 2011, unrecognized compensation cost related to nonvested other stock-based compensation plan awards totaled $33 million, which is expected to be recognized over a weighted-average period of 1.6 years.

PEC

PEC's Consolidated Statements of Income included total recognized expense for other stock-based compensation plans of $20 million for the year ended December 31, 2011, with a recognized tax benefit of $8 million. The total expense recognized on PEC's Consolidated Statements of Income for other stock-based compensation plans was $16 million, with a recognized tax benefit of $6 million, and $22 million, with a recognized tax benefit of $9 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

PEF

PEF's Statements of Income included total recognized expense for other stock-based compensation plans of $13 million for the year ended December 31, 2011, with a recognized tax benefit of $5 million. The total expense recognized on PEF's Statements of Income for other stock-based compensation plans was $11 million, with a recognized tax benefit of $4 million, and $14 million, with a recognized tax benefit of $5 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

C. EARNINGS PER COMMON SHARE

Basic earnings per common share are based on the weighted-average number of common shares outstanding, which includes the effects of unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents. Diluted earnings per share include the effects of the nonvested portion of 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)		2011	2010	2009
Weighted-average common shares – basic		295.8	290.7	279.4
Net effect of dilutive stock-based compensation plans		0.1	0.1	0.1
	Weighted-average shares – fully diluted	295.9	290.8	279.5

There were no adjustments to net income or to income from continuing operations attributable to controlling interests between the calculations of basic and fully diluted earnings per common share. There were 0.8 million and 1.5 million stock options outstanding at December 31, 2010 and 2009, respectively, which were not included in the weighted-average number of shares for computing the fully diluted earnings per share because they were antidilutive. As of December 31, 2011, there were no antidilutive stock options outstanding.

D. ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss, net of tax, at December 31 were as follows:


			Progress Energy				PEC				PEF
(in millions)			2011		2010		2011		2010		2011		2010
Cash flow hedges		$	(143)	$	(63)	$	(71)	$	(33)	$	(27)	$	(4)
Pension and other postretirement benefits			(22)		(62)		-		-		-		-
	Total accumulated other comprehensive loss	$	(165)	$	(125)	$	(71)	$	(33)	$	(27)	$	(4)

Equity And Comprehensive Income Disclosure [Line Items]

Equity

10. EQUITY

A. COMMON STOCK

PEF

At December 31, 2011 and December 31, 2010, PEF was authorized to issue up to 60 million shares of common stock. All PEF common shares issued and outstanding are indirectly held by Progress Energy. There are various provisions limiting the use of retained earnings for the payment of dividends under certain circumstances. At December 31, 2011, there were no significant restrictions on the use of retained earnings. See Note 12B for additional dividend restrictions related to PEF.

B. STOCK-BASED COMPENSATION

EMPLOYEE STOCK OWNERSHIP PLAN

We sponsor the 401(k) for which substantially all full-time nonbargaining unit employees and certain part-time nonbargaining unit employees within participating subsidiaries are eligible. The 401(k), which has a matching feature, encourages systematic savings by employees and provides a method of acquiring Progress Energy common stock and other diverse investments. The 401(k), as amended in 1989, is an Employee Stock Ownership Plan (ESOP) that can enter into acquisition loans to acquire Progress Energy common stock to satisfy 401(k) common share needs. Qualification as an ESOP did not change the level of benefits received by employees under the 401(k). Common stock acquired with the proceeds of an ESOP loan was held by the 401(k) Trustee in a suspense account. The common stock was released from the suspense account and made available for allocation to participants as the ESOP loan was repaid. Such allocations were used to partially meet common stock needs related to matching and incentive contributions and/or reinvested dividends. All or a portion of the dividends paid on ESOP suspense shares and on ESOP shares allocated to participants may be used to repay ESOP acquisition loans. Dividends that are used to repay such loans, paid directly to participants or reinvested by participants, are deductible for income tax purposes. By December 31, 2010, no ESOP suspense shares were outstanding and the ESOP acquisition loan was repaid.

ESOP shares allocated to plan participants totaled 13.4 million at December 31, 2010. Our matching compensation cost under the 401(k) is determined based on matching percentages as defined in the plan. Through December 31, 2010, such compensation cost was allocated to participants' accounts in the form of Progress Energy common stock. Beginning in 2011, such compensation cost was allocated to participants' accounts in the same investments and election percentages as the participants' contributions. In 2010, we met common stock share needs with open market purchases and with shares released from the ESOP suspense account. Matching costs met with shares released from the suspense account totaled $12 million for the years ended December 31, 2010 and 2009, respectively. In 2011, we met common stock share needs with open market purchases.

We also sponsor the Savings Plan for Employees of Florida Progress Corporation, which is an ESOP plan that covers bargaining unit employees of PEF.

Total matching cost for both plans was $44 million, $43 million and $41 million for the years ended December 31, 2011, 2010 and 2009, respectively.

PEC

PEC's matching costs met with shares released from the ESOP suspense account totaled $8 million for the years ended December 31, 2010 and 2009, respectively. Total matching cost was $23 million, $23 million and $22 million for the years ended December 31, 2011, 2010 and 2009, respectively.

PEF

PEF's matching costs met with shares released from the ESOP suspense account totaled $3 million and $4 million for the years ended December 31, 2010 and 2009, respectively. Total matching cost for both plans was $14 million, $14 million and $12 million for the years ended December 31, 2011, 2010 and 2009, respectively.

OTHER STOCK-BASED COMPENSATION PLANS

We have additional compensation plans for our officers and key employees that are stock-based in whole or in part. Our long-term compensation program currently includes two types of equity-based incentives: performance shares under the Performance Share Sub-Plan (PSSP) and restricted stock programs. The compensation program was established pursuant to our 1997 Equity Incentive Plan (EIP) and was continued under our 2002 and 2007 EIPs, as amended and restated from time to time. As authorized by the EIPs, we may grant up to 20 million shares of Progress Energy common stock through our long-term compensation program.

Beginning in 2009, shares issued under the redesigned PSSP use total shareholder return and earnings growth as two equally weighted performance measures. The outcome of the performance measures can result in an increase or decrease from the target number of performance shares granted. We distribute common stock shares to participants equivalent to the number of performance shares that ultimately vest. We issue new shares of common stock to satisfy the requirements of the PSSP program. Also, the fair value of the stock-settled award is generally established at the grant date based on the fair value of common stock on that date, with subsequent adjustments made to reflect the status of the performance measure. Compensation expense for all awards is reduced by estimated forfeitures. At December 31, 2011, there were an immaterial number of stock-settled performance target shares outstanding. The final number of shares issued will be dependent upon the outcome of the performance measures discussed above.

Beginning in 2007, we began issuing restricted stock units (RSUs) rather than the previously issued 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 three- 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 included as shares outstanding in the basic earnings per share calculation and are converted to shares upon vesting. At December 31, 2011, there were an immaterial number of RSUs outstanding.

The total fair value of RSUs vested during the years ended December 31, 2011, 2010 and 2009, was $24 million, $24 million and $16 million, respectively. No cash was expended to purchase stock to satisfy RSU plan obligations in 2011, 2010 and 2009. The RSUs vested during 2011 had a weighted-average grant date fair value of $39.16.

Our Consolidated Statements of Income included total recognized expense for other stock-based compensation plans of $33 million for the year ended December 31, 2011, with a recognized tax benefit of $13 million. The total expense recognized on our Consolidated Statements of Income for other stock-based compensation plans was $27 million, with a recognized tax benefit of $11 million, and $37 million, with a recognized tax benefit of $14 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

At December 31, 2011, unrecognized compensation cost related to nonvested other stock-based compensation plan awards totaled $33 million, which is expected to be recognized over a weighted-average period of 1.6 years.

PEC

PEC's Consolidated Statements of Income included total recognized expense for other stock-based compensation plans of $20 million for the year ended December 31, 2011, with a recognized tax benefit of $8 million. The total expense recognized on PEC's Consolidated Statements of Income for other stock-based compensation plans was $16 million, with a recognized tax benefit of $6 million, and $22 million, with a recognized tax benefit of $9 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

PEF

PEF's Statements of Income included total recognized expense for other stock-based compensation plans of $13 million for the year ended December 31, 2011, with a recognized tax benefit of $5 million. The total expense recognized on PEF's Statements of Income for other stock-based compensation plans was $11 million, with a recognized tax benefit of $4 million, and $14 million, with a recognized tax benefit of $5 million, for the years ended December 31, 2010 and 2009, respectively. No compensation cost related to other stock-based compensation plans was capitalized.

D. ACCUMULATED OTHER COMPREHENSIVE LOSS

Components of accumulated other comprehensive loss, net of tax, at December 31 were as follows:


			Progress Energy				PEC				PEF
(in millions)			2011		2010		2011		2010		2011		2010
Cash flow hedges		$	(143)	$	(63)	$	(71)	$	(33)	$	(27)	$	(4)
Pension and other postretirement benefits			(22)		(62)		-		-		-		-
	Total accumulated other comprehensive loss	$	(165)	$	(125)	$	(71)	$	(33)	$	(27)	$	(4)