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EMPLOYEE STOCK OWNERSHIP PLAN
 12 Months Ended
Dec. 31, 2011
Notes To Consolidated Financial Statements [Abstract]  
Shareholders' Equity and Share-based Payments [Text Block]

C.       Employee Stock Ownership Plan

NU maintains an ESOP for purposes of allocating shares to NU, CL&P, PSNH and WMECO's employees participating in NU's 401(k) Savings Plan. NU issued unsecured notes during 1991 and 1992 totaling $250 million, the proceeds of which were loaned to the ESOP trust (ESOP Notes) for the purchase of 10.8 million newly issued NU common shares (ESOP shares). During 2010, the ESOP Notes were fully repaid and all ESOP shares purchased with the proceeds of the ESOP Notes were fully allocated. As of December 31, 2011 and 2010, total allocated ESOP shares were 10,800,185. Following complete allocation of the ESOP shares, continuing allocations of NU common shares were made from NU treasury shares to satisfy the 401(k) Savings Plan obligation to provide a portion of the matching contribution in NU common shares. NU's contributions to the ESOP trust for the years ended December 31, 2010 and 2009 totaled $1.1 million and $6.1 million, respectively. As the ESOP notes were fully repaid in 2010, no contributions were made in 2011. In 2010, the ESOP trust allocated 127,054 of NU common shares to satisfy 401(k) Savings Plan obligations to employees.

 

For treasury shares used to satisfy the 401(k) Savings Plan matching contributions, compensation expense is recognized equal to the fair value of shares that have been allocated to participants. Any difference between the fair value and the average cost of the allocated treasury shares is charged or credited to Capital Surplus, Paid In. For the years ended December 31, 2011, 2010 and 2009, NU recognized $8.8 million, $8.5 million and $8.2 million, respectively, of expense related to the ESOP.

 

Dividends on the ESOP unallocated shares are not considered dividends for financial reporting purposes. For the years ended 2011, 2010 and 2009, NU paid quarterly dividends of $0.275 per share, $0.25625 per share and $0.2375 per share, respectively.

 

D.       Share-Based Payments

In accordance with accounting guidance for share-based payments, share-based compensation awards are recorded using the fair value-based method based on the fair value at the date of grant. This guidance applies to share-based compensation awards granted on or after January 1, 2006 or to awards for which the requisite service period has not been completed. NU, CL&P, PSNH and WMECO record compensation cost related to these awards, as applicable, for shares issued or sold to NU, CL&P, PSNH and WMECO employees and officers, as well as the allocation of costs associated with shares issued or sold to NUSCO employees and officers that support CL&P, PSNH and WMECO.

 

NU Incentive Plan: NU maintains long-term equity-based incentive plans under the NU Incentive Plan in which NU, CL&P, PSNH and WMECO employees, officers and board members are entitled to participate. The NU Incentive Plan was approved in 2007, and authorized NU to grant up to 4,500,000 new shares for various types of awards, including RSUs and performance shares, to eligible employees, officers, and board members. As of December 31, 2011 and 2010, NU had 2,685,615 and 3,068,850 common shares, respectively, available for issuance under the NU Incentive Plan. In addition to the NU Incentive Plan, NU maintains an ESPP for all eligible NU, CL&P, PSNH and WMECO employees.

 

NU accounts for its various share-based plans as follows:

 

  • For grants of RSUs, NU records compensation expense, net of estimated forfeitures, on a straight-line basis over the vesting period based upon the fair value of NU's common shares at the date of grant. Dividend equivalents on RSUs are charged to retained earnings, net of estimated forfeitures.

     

  • For grants of performance shares, NU records compensation expense, net of estimated forfeitures, on a straight-line basis over the vesting period. Performance shares vest based upon the extent to which Company goals are achieved. For the majority of performance shares, fair value is based upon the value of NU's common shares at the date of grant and compensation expense is recorded based upon the probable outcome of the achievement of Company targets. The fair value of the remaining performance shares are based upon the achievement of the Company's share price as compared to an index of similar equity securities. The fair value at the date of grant for these remaining performance shares was determined using a lattice model and compensation expense is recorded over the vesting period.

     

  • For shares sold under the ESPP, no compensation expense is recorded, as the ESPP qualifies as a non-compensatory plan.

 

For the years ended December 31, 2011, 2010 and 2009, additional tax benefits totaling $1.3 million, $0.9 million and $0.9 million, respectively, increased cash flows from financing activities.

 

RSUs: NU has granted RSUs under the 2004 through 2011 incentive programs that are subject to three-year and four-year graded vesting schedules for employees, and one-year graded vesting schedules for board members. RSUs are paid in shares, reduced by amounts sufficient to satisfy withholdings, subsequent to vesting. A summary of RSU transactions is as follows:

 

    Weighted Average
  RSUs Grant-Date
RSUs(Units) Fair Value
Outstanding as of January 1, 2009  912,991 $ 24.75
Granted  347,112 $ 23.26
Shares issued  (203,888) $ 25.55
Forfeited  (18,303) $ 26.26
Outstanding as of December 31, 2009  1,037,912 $ 24.07
Granted  258,174 $ 26.03
Shares issued  (267,951) $ 25.05
Forfeited  (13,656) $ 24.26
Outstanding as of December 31, 2010  1,014,479 $ 24.31
Granted  208,533 $ 33.87
Shares issued  (244,782) $ 24.47
Forfeited  (18,310) $ 23.74
Outstanding as of December 31, 2011  959,920 $ 26.36

As of December 31, 2011 and 2010, the number and weighted average grant-date fair value of unvested RSUs was 403,108 and $28.70 per share, and 519,900 and $24.77 per share, respectively. The number and weighted average grant-date fair value of RSUs vested during 2011 was 292,185 and $25.25 per share, respectively. As of December 31, 2011, 556,812 RSUs were fully vested and an additional 382,953 are expected to vest.

 

On November 16, 2010, NU granted 192,309 RSUs to certain executives, contingent upon completion of the pending merger with NSTAR, with a three year vesting period that would begin as of the closing date of the merger.

 

Performance Shares: NU has granted performance shares under the 2009, 2010 and 2011 incentive programs that vest based upon the extent to which the Company achieves targets at the end of each respective three-year performance measurement period. Performance shares are paid in shares, after the performance measurement period. A summary of performance share transactions is as follows:

  Performance Weighted Average
  Shares Grant-Date
Performance Shares(Units) Fair Value
Outstanding as of January 1, 2009  - $ -
Granted  104,150 $ 23.93
Shares issued  - $ -
Forfeited  (5,064) $ 23.96
Outstanding as of December 31, 2009  99,086 $ 23.93
Granted  149,520 $ 25.24
Shares issued  - $ -
Forfeited  (47) $ 23.96
Outstanding as of December 31, 2010  248,559 $ 24.72
Granted  244,870 $ 33.76
Shares issued  - $ -
Forfeited  (10,296) $ 30.47
Outstanding as of December 31, 2011  483,133 $ 29.18

As of December 31, 2011, performance shares vested at 100 percent of target under the 2009 incentive program. Such shares will be distributed to participants in the form of NU common shares prior to March 15, 2012. Under this performance plan, 105,934 shares vested, with a weighted-average grant date fair value of $24.42 per share.

 

As of December 31, 2011 and 2010, there were 377,199 and 248,559 unvested performance shares with a weighted-average grant date fair value of $30.52 per share and $24.72 per share, respectively. As of December 31, 2011, based upon the probable outcome of certain performance metrics, performance shares are expected to vest at 115 percent of target under the 2010 incentive program, and at 98 percent of target under the 2011 incentive program.

 

The total compensation cost recognized by NU, CL&P, PSNH and WMECO for share-based compensation awards was as follows:

NU   For the Years Ended December 31,
(Millions of Dollars)2011 2010 2009
Compensation Cost Recognized$ 12.3 $ 10.5 $ 8.8
Associated Future Income Tax Benefit Recognized  4.9   4.2   3.5

   For the Years Ended December 31,
   2011 2010 2009
(Millions of Dollars)CL&P PSNH WMECO CL&P PSNH WMECO CL&P PSNH WMECO
Compensation Cost Recognized$ 7.1 $ 2.5 $ 1.4 $ 6.2 $ 2.1 $ 1.1 $ 5.3 $ 1.7 $ 0.9
Associated Future Income Tax Benefit Recognized  2.8   1.0   0.6   2.5   0.9   0.4   2.1   0.7   0.4

As of December 31, 2011, there was $8.9 million of total unrecognized compensation cost related to nonvested share-based awards for NU, $5.0 million for CL&P, $1.8 million for PSNH and $1.0 million for WMECO. This cost is expected to be recognized ratably over a weighted-average period of 1.77 years for NU, CL&P and PSNH and 1.76 years for WMECO.

 

Stock Options: Prior to 2003, NU granted stock options to certain employees. The options expire ten years from the date of grant. All options were fully vested as of December 31, 2005. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model. The weighted average remaining contractual lives for the options outstanding as of December 31, 2011 is 0.3 years. No compensation expense related to stock options was recorded for the years ended December 31, 2011, 2010 or 2009. A summary of stock option transactions is as follows:

     Exercise Price Per Share   
         Weighted Intrinsic Value
  Options Range Average (Millions)
Outstanding and exercisable - January 1, 2009  320,920 $ 14.94-$ 21.03 $ 18.83   
Exercised  (95,704)     $ 18.54 $ 0.6
Forfeited and cancelled  -     $ -   
Outstanding and exercisable - December 31, 2009  225,216 $ 17.40-$ 21.03 $ 18.96   
Exercised  (112,617)     $ 19.12 $ 1.0
Forfeited and cancelled  -     $ -   
Outstanding and exercisable - December 31, 2010  112,599 $ 17.40-$ 21.03 $ 18.80   
Exercised  (65,225)     $ 18.81 $ 1.0
Forfeited and cancelled  -     $ -   
Outstanding and exercisable - December 31, 2011  47,374 $ 18.58-$ 18.90 $ 18.78 $ 0.8

Cash received for options exercised during the year ended December 31, 2011 totaled $1.2 million. The tax benefit realized from stock options exercised totaled $0.4 million for the year ended December 31, 2011.

 

Employee Share Purchase Plan: NU maintains an ESPP for all eligible NU, CL&P, PSNH, and WMECO employees, which allows for NU common shares to be purchased by employees at the end of successive six-month offering periods at 95 percent of the closing market price on the last day of each six-month period. Employees are permitted to purchase shares having a value not exceeding 25 percent of their compensation as of the beginning of the offering period up to a limit of $25,000 per annum. The ESPP qualifies as a non-compensatory plan under accounting guidance for share-based payments, and no compensation expense is recorded for ESPP purchases.

 

During 2011, employees purchased 35,476 shares at discounted prices of $31.27 and $32.30. Employees purchased 38,672 shares in 2010 at discounted prices of $26.45 and $24.05. As of December 31, 2011 and 2010, 896,702 and 932,178 shares, respectively, remained available for future issuance under the ESPP.

 

An income tax rate of 40 percent is used to estimate the tax effect on total share-based payments determined under the fair value-based method for all awards. The Company generally settles stock option exercises and fully vested RSUs and performance shares with the issuance of new common shares.