Common Stock (Notes)

12 Months Ended

Dec. 31, 2019

Common Stock, Number of Shares, Par Value and Other Disclosures [Abstract]

Common Stock and Earnings Per Share Information

Common Stock

Overview

The Company’s common stock has a stated value of $1 per share, with no cumulative voting rights or preemptive rights. Holders of the common stock have the right to elect the Company’s directors and to vote on other matters.

Long-Term Incentive Plan

On May 29, 2014, the Company’s shareholders approved an amended and restated stock-based long-term incentive plan ("Amended and Restated 2007 LTIP") and authorized the issuance of up to 1.7 million shares of the Company's common stock for the benefit of directors and employees. Under the Amended and Restated 2007 LTIP, shares of the Company's common stock may be issued through the award or grant of non-statutory stock options, incentive stock options, stock appreciation rights, restricted stock, bonus stock, performance stock, cash-based awards and other stock-based awards. The Company may purchase shares on the open market, or issue shares from shares of the Company's common stock the Company has repurchased to meet the share requirements of the Amended and Restated 2007 LTIP. Beginning in 2015, shares of the Company's common stock issued for employee benefit and stock incentive plans have been issued from the shares repurchased and held in treasury stock. However, under the Merger Agreement, the Company is subject to certain limitations in which it may issue common stock pursuant to the Amended and Restated 2007 LTIP. As discussed in Part II, Item 8, Financial Statements and Supplementary Data, Note A of Notes to Financial Statements, the Company accounts for its stock-based long-term incentive plan under the FASB guidance for stock-based compensation.

Restricted Stock with Service Condition and Other Stock-Based Awards. The Company has awarded restricted stock and other stock-based awards under its long-term incentive plan. Restrictions from resale on restricted stock awards generally lapse and awards vest over periods of one to three years, subject to continuous service requirements. The market value of the unvested restricted stock at the date of grant is amortized to expense over the restriction period net of anticipated forfeitures. Other stock-based awards, granted to directors in lieu of cash for retainers and meeting fees, are fully vested and are expensed at fair value on the date of grant and are not included in the tables below. Under the Merger Agreement, stock-based awards that are unvested would be cancelled and converted into a vested right to receive cash upon the closing of the Merger. See Part II, Item 8, Financial Statements and Supplementary Data, Note T of Notes to Financial Statements.

The expense, deferred tax benefit, and current tax benefit recognized related to restricted stock and other stock-based awards in 2019, 2018 and 2017 is presented below (in thousands):

	2019		2018		2017
Expense (a)	$	2,320	$	3,198	$	2,997
Deferred tax benefit	487		671		1,049
Current tax benefit recognized	112		117		318

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(a) Any capitalized costs related to these expenses is less than $0.3 million for all years.

The aggregate intrinsic value and fair value at grant date of restricted stock and other stock-based awards which vested in 2019, 2018 and 2017 is presented below (in thousands):

	2019		2018		2017
Aggregated intrinsic value	$	3,202	$	3,771	$	3,711
Fair value at grant date	2,667		3,212		2,803

The unvested restricted stock transactions for 2019 are presented below:

	Total Shares		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (b)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Restricted shares outstanding at December 31, 2018	93,908		$	51.60
Stock awards (a)	83,585		58.71
Vested	(50,504	)	52.82
Forfeitures	(31,185	)	49.38
Restricted shares outstanding at December 31, 2019	95,804		57.89		$	2,853	$	6,504

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(a) On July 31, 2019, the Company issued a special grant to the Company's former President and Chief Executive Officer ("CEO") of 27,624 shares in accordance with the Amended and Restated 2007 LTIP that is eligible for vesting immediately prior to the closing of the Merger. In the event the Merger Agreement is terminated without the closing of the Merger, these shares will be forfeited.

(b) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the outstanding restricted stock of approximately one year, subject to acceleration under the provisions of the Merger Agreement.

The weighted average fair value per share at grant date for restricted stock and other stock-based awards granted during 2019, 2018 and 2017 were:

	2019		2018		2017
Weighted average fair value per share	$	58.71	$	54.49	$	49.78

The holder of a restricted stock award has rights as a shareholder of the Company, including the right to vote and receive cash dividends on restricted stock.

Restricted Stock with a Market Condition (Performance Shares). The Company has granted performance share awards to certain officers under the Company’s Amended and Restated 2007 LTIP, which provides for issuance of Company stock based on the achievement of certain performance criteria over a three-year period. The payout varies between 0% to 200% of performance share awards.

Detail of performance shares vested follows:

Date Vested	Payout Ratio		Performance Shares Awarded		Compensation Costs Expensed		Period Compensation Costs Expensed	Aggregated Intrinsic Value
					(In thousands)			(In thousands)
January 29, 2020	150	%	39,027	(a)	$	1,109	2017-2019	$	2,660
January 30, 2019	71	%	39,923		2,143		2016-2018	2,046
January 31, 2018	175	%	68,379		1,499		2015-2017	3,569
January 25, 2017	32	%	11,314		932		2014-2016	512

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(a) 6,908 shares vested on December 20, 2019.

In 2020, 2021 and 2022, subject to meeting certain performance criteria and continuous service requirements, additional performance shares could vest. Under the Merger Agreement, shares would vest upon the closing of the Merger. Under the Merger

Agreement, performance shares that are unvested would be cancelled and converted into a vested right to receive cash upon the closing for the Merger. In accordance with the FASB guidance related to stock-based compensation, the Company recognizes the related compensation expense by ratably amortizing the grant date fair value of awards over the requisite service period and the compensation expense is only adjusted for forfeitures. As of December 31, 2019, the maximum number of shares that can be issued under the Company's Amended and Restated 2007 LTIP are 145,585 shares.

The fair value at the date of each separate grant of performance shares was based upon a Monte Carlo simulation. The Monte Carlo simulation reflected the structure of the performance plan which calculates the share payout on performance of the Company relative to a defined peer group over a three-year performance period based upon total return to shareholders. The fair value was determined as the average payout of one million simulation paths discounted to the grant date using a risk-free interest rate based upon the constant maturity treasury rate yield curve at the grant date. The expected volatility of total return to shareholders is calculated in accordance with the performance shares' term structure and includes the volatilities of all members of the defined peer group.

The outstanding performance share awards at the 100% performance level is summarized below:

	Number Outstanding		Weighted Average Grant Date Fair Value		Unrecognized Compensation Expense (b)		Aggregate Intrinsic Value
					(In thousands)		(In thousands)
Performance shares outstanding at December 31, 2018	175,845		$	40.90
Performance share awards	49,826		48.85
Performance shares vested	(46,831	)	38.78
Performance shares expired	(16,317	)	38.11
Performance shares forfeited (a)	(86,677	)	41.52
Performance shares outstanding at December 31, 2019	75,846		47.33		$	302	$	5,149

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(a) On August 1, 2019, the Company's former President and CEO forfeited the retention grant of 27,624 shares issued on December 15, 2015.

(b) The unrecognized compensation expense is expected to be recognized over the weighted average remaining contractual term of the awards of approximately one year. Under the Merger Agreement, performance shares that are unvested would be cancelled and converted into a vested right to receive cash upon the closing for the Merger.

A summary of information related to performance shares for 2019, 2018 and 2017 is presented below:

	2019		2018		2017
Weighted average per share grant date fair value per share of performance shares awarded	$	48.85	$	48.99	$	42.62
Fair value of performance shares vested (in thousands)	1,816		1,499		298
Intrinsic value of performance shares vested (in thousands) (a)	2,514		2,040		512
Compensation expense (in thousands) (b) (c)	153		2,271		2,012
Deferred tax benefit related to compensation expense (in thousands) (b)	32		477		704

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(a) Based on a 71%, 100% and 32% performance level, respectively.

(b) Includes adjustments for estimated forfeitures.

(c) 2019 includes forfeiture of the Company's former President and CEO's retention grant included in 2018 and 2017.

Repurchase Program

No shares of the Company's common stock were repurchased during the twelve months ended December 31, 2019. Detail regarding the Company's stock repurchase program are presented below:

	Since 1999 (a)		Authorized Shares
Shares repurchased (b) (c)	25,406,184
Cost, including commission (in thousands)	$	423,647
Total remaining shares available for repurchase at December 31, 2019 (d)			393,816

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(a) Represents repurchased shares and cost since inception of the stock repurchase program in 1999.

(b) Shares repurchased does not include 86,735 treasury shares related to employee compensation arrangements that were not part of the Company's repurchase program.

(c) Beginning in 2015, shares of the Company's common stock issued for employee benefit and stock incentive plans have been issued from the shares repurchased and held in treasury stock. The Company has issued 396,657 treasury shares since 2015 including 51,305 shares during 2019.

(d) The Company may make purchases of shares of its common stock pursuant to its authorized program in open market transactions at prevailing prices and may engage in private transactions where appropriate. The repurchased shares will be available for issuance under employee benefit and stock incentive plans or the repurchased shares may be retired.

Authorization to Issue and Retire Shares

On January 30, 2019, the Company submitted an application with both the NMPRC and the FERC seeking approval to issue shares of common stock, including the reissuance of treasury shares, in an amount up to $200.0 million in one or more transactions. The Company received final approvals for such issuances from the NMPRC and the FERC on March 27, 2019 and April 18, 2019 respectively. Under the Merger Agreement, the Company cannot issue shares of common stock, subject to limited exceptions, without the prior written consent of Parent. In order to align the number of shares of common stock held as treasury stock by the Company with various regulatory applications, filings and orders, on May 23, 2019, the Board of Directors of the Company (the "Board of Directors") approved the cancellation of 1.4 million shares of common stock held as treasury shares by the Company effective May 31, 2019.

Dividend Policy

On December 27, 2019, the Company paid $15.7 million in quarterly cash dividends to shareholders. The Company paid a total of $61.7 million, $57.5 million and $53.3 million in cash dividends during the twelve months ended December 31, 2019, 2018 and 2017, respectively.

Under the Merger Agreement, the Company is not allowed to declare or pay dividends or distributions on shares of common stock in an amount in excess of $0.385 per share for quarterly dividends declared before June 1, 2020 and $0.41 per share for quarterly dividends declared on or after June 1, 2020. See Part II, Item 8, Financial Statements, Note T of Notes to Financial Statements for further discussion.

Basic and Diluted Earnings Per Share

The FASB guidance requires the Company to include share-based compensation awards that qualify as participating securities in both basic and diluted earnings per share to the extent they are dilutive. A share-based compensation award is considered a participating security if it receives non-forfeitable dividends or may participate in undistributed earnings with common stock. The Company awards unvested restricted stock, which qualifies as a participating security. The basic and diluted earnings per share are presented below: 

	Years Ended December 31,
	2019			2018			2017
Weighted average number of common shares outstanding:
Basic number of common shares outstanding	40,605,597			40,521,364			40,414,556
Dilutive effect of unvested performance awards	75,624			121,276			120,635
Diluted number of common shares outstanding	40,681,221			40,642,640			40,535,191
Basic net income per common share:
Net income	$	123,037		$	84,315		$	98,261
Income allocated to participating restricted stock	(402		)	(297		)	(368		)
Net income available to common shareholders	$	122,635		$	84,018		$	97,893
Diluted net income per common share:
Net income	$	123,037		$	84,315		$	98,261
Income reallocated to participating restricted stock	(402		)	(296		)	(368		)
Net income available to common shareholders	$	122,635		$	84,019		$	97,893
Basic net income per common share:
Distributed earnings	$	1.515		$	1.415		$	1.315
Undistributed earnings	1.505			0.655			1.105
Basic net income per common share	$	3.020		$	2.070		$	2.420
Diluted net income per common share:
Distributed earnings	$	1.515		$	1.415		$	1.315
Undistributed earnings	1.495			0.655			1.105
Diluted net income per common share	$	3.010		$	2.070		$	2.420

The amount of restricted stock awards and performance shares at 100% performance level excluded from the calculation of the diluted number of common shares outstanding because their effect was antidilutive is presented below: 

	Year Ended December 31,
	2019	2018	2017
Restricted stock awards	51,647	62,836	67,739
Performance shares (a)	10,913	22,815	—

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(a)

Certain performance shares were excluded from the computation of diluted earnings per share as no payouts would have been required based upon performance at the end of each corresponding period.