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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2016
Stock-Based Compensation

13:Stock-Based  Compensation

CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten-year term, expiring in May 2024.

In 2016, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2016, 2015, or 2014.

Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2014 through May 2024, nor may such awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy and Consumers may issue awards of up to 4,983,931 shares of common stock under the PISP as of December 31, 2016. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are cancelled or forfeited, may be awarded or granted again under the PISP.

All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document.

Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.

Performance-based restricted stock vesting is contingent on meeting at least a 36‑month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2016, 2015, and 2014 require a 38‑month service period. Market-based restricted stock vesting is generally contingent on meeting a three-year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three-year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years.

Restricted Stock Units: In 2016 and 2015, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2016.

Presented in the following tables is the activity for restricted stock and restricted stock units under the 2009 and 2014 PISPs:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



CMS Energy, including Consumers

 

Consumers

 

Year Ended December 31, 2016

Number of 
Shares 

 

Weighted-Average 
Grant Date Fair Value 
per Share 

 

Number of 
Shares 

 

Weighted-Average 
Grant Date Fair Value 
per Share 

 

Nonvested at beginning of period

 1,624,934 

 

 

$

 29.08 

 

 1,557,657 

 

 

$

 29.06 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

826,075 

 

 

 

 31.74 

 

 786,328 

 

 

 

 31.77 

 

Restricted stock units

 15,338 

 

 

 

 39.12 

 

 14,907 

 

 

 

 39.12 

 

Vested

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

(819,658)

 

 

 

 24.37 

 

 (782,505)

 

 

 

 24.39 

 

Restricted stock units

 (13,588)

 

 

 

 33.22 

 

 (13,233)

 

 

 

 33.23 

 

Forfeited - restricted stock

 (245,504)

 

 

 

 35.18 

 

 (234,523)

 

 

 

 35.17 

 

Nonvested at end of period

 1,387,597 

 

 

$

 32.44 

 

 1,328,631 

 

 

$

 32.41 

 



                    



 

 

 

 

 



 

 

 

 

 

Year Ended December 31, 2016

 

CMS Energy, including 
Consumers 

 

Consumers 

 

Granted

 

 

 

 

 

Time-lapse awards

 

 188,303 

 

 180,958 

 

Market-based awards

 

 185,464 

 

 175,818 

 

Performance-based awards

 

 185,464 

 

 175,818 

 

Restricted stock units

 

 14,595 

 

 14,186 

 

Dividends on market-based awards

 

 38,652 

 

 36,646 

 

Dividends on performance-based awards

 

 14,438 

 

 13,704 

 

Dividends on restricted stock units

 

 743 

 

 721 

 

Additional market-based shares based on achievement of condition

 

 213,754 

 

 203,384 

 

Total granted

 

 841,413 

 

 801,235 

 



CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.

The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.

Presented in the following table are the most important assumptions used to estimate the fair value of the market-based restricted stock awards:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Years Ended December 31

 2016 

 

 2015 

 

 2014 

 

 

Expected volatility

 

 16.7 

%

 

 14.1 

%

 

 15.6 

%

 

Expected dividend yield

 

 3.2 

 

 

 3.3 

 

 

 3.7 

 

 

Risk-free rate

 

 1.0 

 

 

 0.8 

 

 

 0.8 

 

 



Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Years Ended December 31

 2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Weighted-average grant-date fair value per share

 

 

 

 

 

 

 

 

 

 

Restricted stock granted

 

$

 31.74 

 

$

 36.84 

 

$

 26.15 

 

Restricted stock units granted

 

 

 39.12 

 

 

 34.25 

 

 

 -

 

Consumers

 

 

 

 

 

 

 

 

 

 

Weighted-average grant-date fair value per share

 

 

 

 

 

 

 

 

 

 

Restricted stock granted

 

$

 31.77 

 

$

 36.83 

 

$

 26.18 

 

Restricted stock units granted

 

 

 39.12 

 

 

 34.25 

 

 

 -

 



Presented in the following table are amounts related to restricted stock awards and restricted stock units:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

 2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Fair value of shares that vested during the year

 

$

 31 

 

$

 29 

 

$

 16 

 

Compensation expense recognized

 

 

 16 

 

 

 20 

 

 

 14 

 

Income tax benefit recognized

 

 

 7 

 

 

 8 

 

 

 5 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Fair value of shares that vested during the year

 

$

 30 

 

$

 28 

 

$

 15 

 

Compensation expense recognized

 

 

 16 

 

 

 19 

 

 

 13 

 

Income tax benefit recognized

 

 

 6 

 

 

 7 

 

 

 5 

 



At December 31, 2016, $15 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $14 million of total unrecognized compensation cost was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost over a weighted-average period of 1.8 years.

Consumers Energy Company [Member]  
Stock-Based Compensation

13:Stock-Based  Compensation

CMS Energy and Consumers provide a PISP to officers, employees, and non‑employee directors based on their contributions to the successful management of the company. The PISP has a ten-year term, expiring in May 2024.

In 2016, all awards were in the form of restricted stock or restricted stock units. The PISP also allows for unrestricted common stock, stock options, stock appreciation rights, phantom shares, performance units, and incentive options, none of which was granted in 2016, 2015, or 2014.

Shares awarded or subject to stock options, phantom shares, or performance units may not exceed 6.5 million shares from June 2014 through May 2024, nor may such awards to any recipient exceed 500,000 shares in any calendar year. CMS Energy and Consumers may issue awards of up to 4,983,931 shares of common stock under the PISP as of December 31, 2016. Shares for which payment or exercise is in cash, as well as shares that expire, terminate, or are cancelled or forfeited, may be awarded or granted again under the PISP.

All awards under the PISP vest fully upon death. Upon a change of control of CMS Energy or termination under an officer separation agreement, the awards will vest in accordance with specific officer agreements. If stated in the award, for restricted stock recipients who terminate employment due to retirement or disability, a pro-rata portion of the award will vest upon termination, with any market-based award also contingent upon the outcome of the market condition and any performance-based award contingent upon the outcome of the performance condition. The pro-rata portion is equal to the portion of the service period served between the award grant date and the employee’s termination date. The remaining portion of the awards will be forfeited. All awards for directors vest fully upon retirement. Restricted shares may be forfeited if employment terminates for any other reason or if the minimum service requirements are not met, as described in the award document.

Restricted Stock Awards: Restricted stock awards for employees under the PISP are in the form of performance-based, market-based, and time-lapse restricted stock. Award recipients receive shares of CMS Energy common stock that have dividend and voting rights. The dividends on time-lapse restricted stock are paid in cash or in CMS Energy common stock. The dividends on performance-based and market-based restricted stock are paid in restricted shares equal to the value of the dividends. These additional restricted shares are subject to the same vesting conditions as the underlying restricted stock shares.

Performance-based restricted stock vesting is contingent on meeting at least a 36‑month service requirement and a performance condition. The performance condition is based on an adjusted measure of CMS Energy’s EPS growth relative to a peer group over a three-year period. The awards granted in 2016, 2015, and 2014 require a 38‑month service period. Market-based restricted stock vesting is generally contingent on meeting a three-year service requirement and a market condition. The market condition is based on a comparison of CMS Energy’s total shareholder return with the median total shareholder return of a peer group over the same three-year period. Depending on the outcome of the performance condition or the market condition, a recipient may earn a total award ranging from zero to 200 percent of the initial grant. Time-lapse restricted stock generally vests after a service period of three years.

Restricted Stock Units: In 2016 and 2015, CMS Energy and Consumers granted restricted stock units to certain non‑employee directors who elected to defer their restricted stock awards. The restricted stock units generally vest after a service period of one year or, if earlier, at the next annual meeting. The restricted stock units will be distributed to the recipients as shares in accordance with the directors’ deferral agreements. Restricted stock units do not have voting rights, but do have dividend rights. In lieu of cash dividend payments, the dividends on restricted stock units are paid in additional units equal to the value of the dividends. These additional restricted stock units are subject to the same vesting and distribution conditions as the underlying restricted stock units. No restricted stock units were forfeited during 2016.

Presented in the following tables is the activity for restricted stock and restricted stock units under the 2009 and 2014 PISPs:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



CMS Energy, including Consumers

 

Consumers

 

Year Ended December 31, 2016

Number of 
Shares 

 

Weighted-Average 
Grant Date Fair Value 
per Share 

 

Number of 
Shares 

 

Weighted-Average 
Grant Date Fair Value 
per Share 

 

Nonvested at beginning of period

 1,624,934 

 

 

$

 29.08 

 

 1,557,657 

 

 

$

 29.06 

 

Granted

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

826,075 

 

 

 

 31.74 

 

 786,328 

 

 

 

 31.77 

 

Restricted stock units

 15,338 

 

 

 

 39.12 

 

 14,907 

 

 

 

 39.12 

 

Vested

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock

(819,658)

 

 

 

 24.37 

 

 (782,505)

 

 

 

 24.39 

 

Restricted stock units

 (13,588)

 

 

 

 33.22 

 

 (13,233)

 

 

 

 33.23 

 

Forfeited - restricted stock

 (245,504)

 

 

 

 35.18 

 

 (234,523)

 

 

 

 35.17 

 

Nonvested at end of period

 1,387,597 

 

 

$

 32.44 

 

 1,328,631 

 

 

$

 32.41 

 



                    



 

 

 

 

 



 

 

 

 

 

Year Ended December 31, 2016

 

CMS Energy, including 
Consumers 

 

Consumers 

 

Granted

 

 

 

 

 

Time-lapse awards

 

 188,303 

 

 180,958 

 

Market-based awards

 

 185,464 

 

 175,818 

 

Performance-based awards

 

 185,464 

 

 175,818 

 

Restricted stock units

 

 14,595 

 

 14,186 

 

Dividends on market-based awards

 

 38,652 

 

 36,646 

 

Dividends on performance-based awards

 

 14,438 

 

 13,704 

 

Dividends on restricted stock units

 

 743 

 

 721 

 

Additional market-based shares based on achievement of condition

 

 213,754 

 

 203,384 

 

Total granted

 

 841,413 

 

 801,235 

 



CMS Energy and Consumers charge the fair value of the restricted stock awards to expense over the required service period and charge the fair value of the restricted stock units to expense immediately. For performance-based awards, CMS Energy and Consumers estimate the number of shares expected to vest at the end of the performance period based on the probable achievement of the performance objective. Performance-based and market-based restricted stock awards have graded vesting features for retirement-eligible employees, and CMS Energy and Consumers recognize expense for those awards on a graded vesting schedule over the required service period. Expense for performance-based and market-based restricted stock awards for non‑retirement-eligible employees and time-lapse awards is recognized on a straight-line basis over the required service period.

The fair value of performance-based and time-lapse restricted stock and restricted stock units is based on the price of CMS Energy’s common stock on the grant date. The fair value of market-based restricted stock awards is calculated on the grant date using a Monte Carlo simulation. CMS Energy and Consumers base expected volatilities on the historical volatility of the price of CMS Energy common stock. The risk-free rate for valuation of the market-based restricted stock awards was based on the three-year U.S. Treasury yield at the award grant date.

Presented in the following table are the most important assumptions used to estimate the fair value of the market-based restricted stock awards:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Years Ended December 31

 2016 

 

 2015 

 

 2014 

 

 

Expected volatility

 

 16.7 

%

 

 14.1 

%

 

 15.6 

%

 

Expected dividend yield

 

 3.2 

 

 

 3.3 

 

 

 3.7 

 

 

Risk-free rate

 

 1.0 

 

 

 0.8 

 

 

 0.8 

 

 



Presented in the following table is the weighted-average grant-date fair value of all awards under the PISP:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

Years Ended December 31

 2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Weighted-average grant-date fair value per share

 

 

 

 

 

 

 

 

 

 

Restricted stock granted

 

$

 31.74 

 

$

 36.84 

 

$

 26.15 

 

Restricted stock units granted

 

 

 39.12 

 

 

 34.25 

 

 

 -

 

Consumers

 

 

 

 

 

 

 

 

 

 

Weighted-average grant-date fair value per share

 

 

 

 

 

 

 

 

 

 

Restricted stock granted

 

$

 31.77 

 

$

 36.83 

 

$

 26.18 

 

Restricted stock units granted

 

 

 39.12 

 

 

 34.25 

 

 

 -

 



Presented in the following table are amounts related to restricted stock awards and restricted stock units:



 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

In Millions  

Years Ended December 31

 2016  2015  2014 

 

CMS Energy, including Consumers

 

 

 

 

 

 

 

 

 

 

Fair value of shares that vested during the year

 

$

 31 

 

$

 29 

 

$

 16 

 

Compensation expense recognized

 

 

 16 

 

 

 20 

 

 

 14 

 

Income tax benefit recognized

 

 

 7 

 

 

 8 

 

 

 5 

 

Consumers

 

 

 

 

 

 

 

 

 

 

Fair value of shares that vested during the year

 

$

 30 

 

$

 28 

 

$

 15 

 

Compensation expense recognized

 

 

 16 

 

 

 19 

 

 

 13 

 

Income tax benefit recognized

 

 

 6 

 

 

 7 

 

 

 5 

 



At December 31, 2016, $15 million of total unrecognized compensation cost was related to restricted stock for CMS Energy, including Consumers, and $14 million of total unrecognized compensation cost was related to restricted stock for Consumers. CMS Energy and Consumers expect to recognize this cost over a weighted-average period of 1.8 years.