XML 139 R21.htm IDEA: XBRL DOCUMENT v2.4.0.6
Stock-Based Compensation
 12 Months Ended
Dec. 31, 2011
PPL Corp [Member]
  
Stock Based Compensation [Line Items]  
Stock-Based Compensation

12. Stock-Based Compensation

 

(PPL, PPL Energy Supply, PPL Electric and LKE)

 

Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation Plan for Key Employees (ICPKE) (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Energy Supply, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

 

The ICP limits the total number of awards that may be granted under it after April 23, 1999 to 15,769,431. The ICPKE limits the total number of awards that may be granted under it after April 25, 2003 to 14,199,796. In addition, each Plan limits the number of shares available for awards in any calendar year to 2% of the outstanding common stock of PPL on the first day of such calendar year. The maximum number of options that can be awarded under each Plan to any single eligible employee in any calendar year is three million shares. Any portion of these options that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

 

Restricted Stock and Restricted Stock Units

 

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement. The shares are subject to forfeiture or accelerated payout under Plan provisions for termination, retirement, disability and death of employees. Restricted shares vest fully if control of PPL changes, as defined by the Plans.

 

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a vesting period, generally three years. The fair value of restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized immediately upon the date of grant. Recipients of restricted stock units may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the Plan provisions for termination, retirement, disability and death of employees. Restricted stock units vest fully if control of PPL changes, as defined by the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

   2011 2010 2009
           
PPL $ 25.25 $ 28.93 $ 29.07
PPL Energy Supply   25.14   29.49   28.49
PPL Electric   25.09   29.40   29.49
LKE      26.31   

Restricted stock and restricted stock unit activity for 2011 was:

      Weighted-
      Average
    Restricted Grant Date Fair
    Shares/Units Value Per Share
PPL      
Nonvested, beginning of period   1,663,122 $ 31.22
 Granted   895,980   25.25
 Vested   (495,917)   37.81
 Forfeited   (23,150)   28.56
Nonvested, end of period   2,040,035   27.03
        
PPL Energy Supply      
Nonvested, beginning of period   580,417 $ 31.33
 Transferred   (86,690)   22.89
 Granted   326,120   25.14
 Vested   (136,767)   41.11
 Forfeited   (17,900)   28.51
Nonvested, end of period   665,180   27.30
        
PPL Electric      
Nonvested, beginning of period   169,325 $ 31.20
 Transferred   13,160   32.92
 Granted   126,100   25.09
 Vested   (51,740)   36.94
 Forfeited   (5,250)   28.76
Nonvested, end of period   251,595   27.10
        
LKE      
Nonvested, beginning of period   174,170 $ 26.31
 Vested   (28,960)   26.31
Nonvested, end of period   145,210   26.31

Substantially all restricted stock and restricted stock unit awards are expected to vest.

 

The total fair value of restricted stock/units vesting for the years ended December 31 was:

   2011 2010 2009
           
PPL $ 19 $ 15 $ 22
PPL Energy Supply   6   7   12
PPL Electric   2   2   2
LKE   1      

Performance Units

 

Performance units are intended to encourage and award future performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in an index group, in this case the S&P Electric Utilities Index. Awards granted in 2010 and 2009 were payable on a graduated basis within the following ranges: if PPL's performance is at or above the 85th percentile of the index group, the award is paid at 200% of the Target Award; at the 50th percentile of the index group, the award is paid at 100% of the Target Award; at the 40th percentile of the index group, the award is paid at 50% of the Target Award; and below the 40th percentile, no award is payable. Awards granted in 2011 provide for payment at 25% of the Target Award if performance falls below the 40th percentile of the index group. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the Plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period. The fair value of performance units granted is recognized on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis if control of PPL changes, as defined by the Plan.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and companies in the index group. PPL had used historical volatility to value its performance units in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands.

 

The weighted-average assumptions used in the model were:

    2011  2010  2009
           
Risk-free interest rate  1.00%  1.41%  1.11%
Expected stock volatility  23.40%  34.70%  31.30%
Expected life  3 years  3 years  3 years

The weighted-average grant date fair value of performance units granted was:

   2011 2010 2009
           
PPL $ 29.67 $ 34.06 $ 39.76
PPL Energy Supply   29.68   34.16   38.18
PPL Electric   29.57   33.54   39.95
LKE   29.20      

Performance unit activity for 2011 was:

      Weighted-
      Average Grant
   Performance Date Fair Value
   Units Per Share
PPL      
Nonvested, beginning of period   286,040 $ 39.40
 Granted   182,953   29.67
 Forfeited   (70,384)   48.61
Nonvested, end of period   398,609   33.31
        
PPL Energy Supply      
Nonvested, beginning of period   77,864 $ 39.08
 Transferred   (18,081)   40.37
 Granted   32,034   29.68
 Forfeited   (16,750)   46.95
Nonvested, end of period   75,067   33.00
        
PPL Electric      
Nonvested, beginning of period   22,231 $ 38.34
 Granted   14,730   29.57
 Forfeited   (4,153)   48.57
Nonvested, end of period   32,808   33.11
        
LKE      
Nonvested, beginning of period      
 Granted   26,893 $ 29.20
Nonvested, end of period   26,893   29.20

Stock Options

 

Under the Plans, stock options may be granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2011, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately if control of PPL changes, as defined by the Plans. The fair value of options granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, historical volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL had used historical volatility to value its stock options granted in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price through 2012. The assumptions used in the model were:

   2011 2010 2009
           
Risk-free interest rate  2.34%  2.52%  2.07%
Expected option life  5.71 years  5.43 years  5.25 years
Expected stock volatility  21.60%  28.57%  26.06%
Dividend yield  5.93%  5.61%  3.48%

The weighted-average grant date fair value of options granted was:

   2011 2010 2009
           
PPL $ 2.47 $ 4.70 $ 5.55
PPL Energy Supply   2.47   4.73   5.55
PPL Electric   2.47   4.62   5.65
LKE   2.47      

Stock option activity for 2011 was:

       Weighted-  
      Weighted Average   
     Average Remaining Aggregate
   Number Exercise Contractual Total Intrinsic
   of Options Price Per Share Term Value
PPL            
Outstanding at beginning of period   5,603,981 $ 32.31      
 Granted   2,068,080   25.78      
 Exercised   (69,220)   21.00      
 Forfeited   (72,643)   29.16      
Outstanding at end of period   7,530,198   30.65   6.5 $ 12
Options exercisable at end of period   4,493,789   32.74   5.0   5
              
PPL Energy Supply            
Outstanding at beginning of period   1,661,026 $ 31.92      
 Transferred   (296,705)   31.86      
 Granted   383,990   25.80      
 Exercised   (31,280)   21.58      
 Forfeited   (26,878)   28.25      
Outstanding at end of period   1,690,153   30.79   6.1 $ 2
Options exercisable at end of period   1,115,175   32.34   4.8   1
              
PPL Electric            
Outstanding at beginning of period   317,150 $ 33.53      
 Granted   168,120   25.74      
 Forfeited   (24,760)   26.66      
Outstanding at end of period   460,510   31.05   7.5 $ 1
Options exercisable at end of period   207,612   35.36   6.1   
              
LKE            
Outstanding at beginning of period            
 Granted   329,600 $ 25.77      
Outstanding at end of period   329,600   25.77   9.1 $ 1

PPL received $1 million in cash from stock options exercised in 2011. The related tax savings were not significant for 2011. Substantially all stock option awards are expected to vest.

 

The total intrinsic value of stock options exercised for the years ended December 31 2011, 2010, and 2009 was not significant.

Compensation Expense

 

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was as follows:

   2011 2010 2009
           
PPL (a) $ 36 $ 26 $ 23
PPL Energy Supply (b)   16   20   17
PPL Electric (c)   8   6   5
LKE (d)   5      

(a)       Income tax benefits of $15 million, $11 million and $9 million.

(b)       Income tax benefits of $6 million, $8 million and $7 million.

(c)       Income tax benefits of $3 million, $3 million and $2 million.

(d)       Income tax benefits of $2 million.

 

The income tax benefit PPL realized from stock-based awards vested or exercised for 2011 was not significant.

At December 31, 2011, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:

       
     Weighted-
   Unrecognized Average
   Compensation Period for
   Expense Recognition
        
PPL $ 19  1.7 years
PPL Energy Supply   6  1.7 years
PPL Electric   3  2.3 years
LKE   2  1.2 years
PPL Energy Supply [Member]
  
Stock Based Compensation [Line Items]  
Stock-Based Compensation

12. Stock-Based Compensation

 

(PPL, PPL Energy Supply, PPL Electric and LKE)

 

Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation Plan for Key Employees (ICPKE) (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Energy Supply, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

 

The ICP limits the total number of awards that may be granted under it after April 23, 1999 to 15,769,431. The ICPKE limits the total number of awards that may be granted under it after April 25, 2003 to 14,199,796. In addition, each Plan limits the number of shares available for awards in any calendar year to 2% of the outstanding common stock of PPL on the first day of such calendar year. The maximum number of options that can be awarded under each Plan to any single eligible employee in any calendar year is three million shares. Any portion of these options that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

 

Restricted Stock and Restricted Stock Units

 

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement. The shares are subject to forfeiture or accelerated payout under Plan provisions for termination, retirement, disability and death of employees. Restricted shares vest fully if control of PPL changes, as defined by the Plans.

 

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a vesting period, generally three years. The fair value of restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized immediately upon the date of grant. Recipients of restricted stock units may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the Plan provisions for termination, retirement, disability and death of employees. Restricted stock units vest fully if control of PPL changes, as defined by the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

   2011 2010 2009
           
PPL $ 25.25 $ 28.93 $ 29.07
PPL Energy Supply   25.14   29.49   28.49
PPL Electric   25.09   29.40   29.49
LKE      26.31   

Restricted stock and restricted stock unit activity for 2011 was:

      Weighted-
      Average
    Restricted Grant Date Fair
    Shares/Units Value Per Share
PPL      
Nonvested, beginning of period   1,663,122 $ 31.22
 Granted   895,980   25.25
 Vested   (495,917)   37.81
 Forfeited   (23,150)   28.56
Nonvested, end of period   2,040,035   27.03
        
PPL Energy Supply      
Nonvested, beginning of period   580,417 $ 31.33
 Transferred   (86,690)   22.89
 Granted   326,120   25.14
 Vested   (136,767)   41.11
 Forfeited   (17,900)   28.51
Nonvested, end of period   665,180   27.30
        
PPL Electric      
Nonvested, beginning of period   169,325 $ 31.20
 Transferred   13,160   32.92
 Granted   126,100   25.09
 Vested   (51,740)   36.94
 Forfeited   (5,250)   28.76
Nonvested, end of period   251,595   27.10
        
LKE      
Nonvested, beginning of period   174,170 $ 26.31
 Vested   (28,960)   26.31
Nonvested, end of period   145,210   26.31

Substantially all restricted stock and restricted stock unit awards are expected to vest.

 

The total fair value of restricted stock/units vesting for the years ended December 31 was:

   2011 2010 2009
           
PPL $ 19 $ 15 $ 22
PPL Energy Supply   6   7   12
PPL Electric   2   2   2
LKE   1      

Performance Units

 

Performance units are intended to encourage and award future performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in an index group, in this case the S&P Electric Utilities Index. Awards granted in 2010 and 2009 were payable on a graduated basis within the following ranges: if PPL's performance is at or above the 85th percentile of the index group, the award is paid at 200% of the Target Award; at the 50th percentile of the index group, the award is paid at 100% of the Target Award; at the 40th percentile of the index group, the award is paid at 50% of the Target Award; and below the 40th percentile, no award is payable. Awards granted in 2011 provide for payment at 25% of the Target Award if performance falls below the 40th percentile of the index group. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the Plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period. The fair value of performance units granted is recognized on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis if control of PPL changes, as defined by the Plan.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and companies in the index group. PPL had used historical volatility to value its performance units in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands.

 

The weighted-average assumptions used in the model were:

    2011  2010  2009
           
Risk-free interest rate  1.00%  1.41%  1.11%
Expected stock volatility  23.40%  34.70%  31.30%
Expected life  3 years  3 years  3 years

The weighted-average grant date fair value of performance units granted was:

   2011 2010 2009
           
PPL $ 29.67 $ 34.06 $ 39.76
PPL Energy Supply   29.68   34.16   38.18
PPL Electric   29.57   33.54   39.95
LKE   29.20      

Performance unit activity for 2011 was:

      Weighted-
      Average Grant
   Performance Date Fair Value
   Units Per Share
PPL      
Nonvested, beginning of period   286,040 $ 39.40
 Granted   182,953   29.67
 Forfeited   (70,384)   48.61
Nonvested, end of period   398,609   33.31
        
PPL Energy Supply      
Nonvested, beginning of period   77,864 $ 39.08
 Transferred   (18,081)   40.37
 Granted   32,034   29.68
 Forfeited   (16,750)   46.95
Nonvested, end of period   75,067   33.00
        
PPL Electric      
Nonvested, beginning of period   22,231 $ 38.34
 Granted   14,730   29.57
 Forfeited   (4,153)   48.57
Nonvested, end of period   32,808   33.11
        
LKE      
Nonvested, beginning of period      
 Granted   26,893 $ 29.20
Nonvested, end of period   26,893   29.20

Stock Options

 

Under the Plans, stock options may be granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2011, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately if control of PPL changes, as defined by the Plans. The fair value of options granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, historical volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL had used historical volatility to value its stock options granted in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price through 2012. The assumptions used in the model were:

   2011 2010 2009
           
Risk-free interest rate  2.34%  2.52%  2.07%
Expected option life  5.71 years  5.43 years  5.25 years
Expected stock volatility  21.60%  28.57%  26.06%
Dividend yield  5.93%  5.61%  3.48%

The weighted-average grant date fair value of options granted was:

   2011 2010 2009
           
PPL $ 2.47 $ 4.70 $ 5.55
PPL Energy Supply   2.47   4.73   5.55
PPL Electric   2.47   4.62   5.65
LKE   2.47      

Stock option activity for 2011 was:

       Weighted-  
      Weighted Average   
     Average Remaining Aggregate
   Number Exercise Contractual Total Intrinsic
   of Options Price Per Share Term Value
PPL            
Outstanding at beginning of period   5,603,981 $ 32.31      
 Granted   2,068,080   25.78      
 Exercised   (69,220)   21.00      
 Forfeited   (72,643)   29.16      
Outstanding at end of period   7,530,198   30.65   6.5 $ 12
Options exercisable at end of period   4,493,789   32.74   5.0   5
              
PPL Energy Supply            
Outstanding at beginning of period   1,661,026 $ 31.92      
 Transferred   (296,705)   31.86      
 Granted   383,990   25.80      
 Exercised   (31,280)   21.58      
 Forfeited   (26,878)   28.25      
Outstanding at end of period   1,690,153   30.79   6.1 $ 2
Options exercisable at end of period   1,115,175   32.34   4.8   1
              
PPL Electric            
Outstanding at beginning of period   317,150 $ 33.53      
 Granted   168,120   25.74      
 Forfeited   (24,760)   26.66      
Outstanding at end of period   460,510   31.05   7.5 $ 1
Options exercisable at end of period   207,612   35.36   6.1   
              
LKE            
Outstanding at beginning of period            
 Granted   329,600 $ 25.77      
Outstanding at end of period   329,600   25.77   9.1 $ 1

PPL received $1 million in cash from stock options exercised in 2011. The related tax savings were not significant for 2011. Substantially all stock option awards are expected to vest.

 

The total intrinsic value of stock options exercised for the years ended December 31 2011, 2010, and 2009 was not significant.

Compensation Expense

 

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was as follows:

   2011 2010 2009
           
PPL (a) $ 36 $ 26 $ 23
PPL Energy Supply (b)   16   20   17
PPL Electric (c)   8   6   5
LKE (d)   5      

(a)       Income tax benefits of $15 million, $11 million and $9 million.

(b)       Income tax benefits of $6 million, $8 million and $7 million.

(c)       Income tax benefits of $3 million, $3 million and $2 million.

(d)       Income tax benefits of $2 million.

 

The income tax benefit PPL realized from stock-based awards vested or exercised for 2011 was not significant.

At December 31, 2011, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:

       
     Weighted-
   Unrecognized Average
   Compensation Period for
   Expense Recognition
        
PPL $ 19  1.7 years
PPL Energy Supply   6  1.7 years
PPL Electric   3  2.3 years
LKE   2  1.2 years
PPL Electric [Member]
  
Stock Based Compensation [Line Items]  
Stock-Based Compensation

12. Stock-Based Compensation

 

(PPL, PPL Energy Supply, PPL Electric and LKE)

 

Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation Plan for Key Employees (ICPKE) (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Energy Supply, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

 

The ICP limits the total number of awards that may be granted under it after April 23, 1999 to 15,769,431. The ICPKE limits the total number of awards that may be granted under it after April 25, 2003 to 14,199,796. In addition, each Plan limits the number of shares available for awards in any calendar year to 2% of the outstanding common stock of PPL on the first day of such calendar year. The maximum number of options that can be awarded under each Plan to any single eligible employee in any calendar year is three million shares. Any portion of these options that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

 

Restricted Stock and Restricted Stock Units

 

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement. The shares are subject to forfeiture or accelerated payout under Plan provisions for termination, retirement, disability and death of employees. Restricted shares vest fully if control of PPL changes, as defined by the Plans.

 

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a vesting period, generally three years. The fair value of restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized immediately upon the date of grant. Recipients of restricted stock units may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the Plan provisions for termination, retirement, disability and death of employees. Restricted stock units vest fully if control of PPL changes, as defined by the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

   2011 2010 2009
           
PPL $ 25.25 $ 28.93 $ 29.07
PPL Energy Supply   25.14   29.49   28.49
PPL Electric   25.09   29.40   29.49
LKE      26.31   

Restricted stock and restricted stock unit activity for 2011 was:

      Weighted-
      Average
    Restricted Grant Date Fair
    Shares/Units Value Per Share
PPL      
Nonvested, beginning of period   1,663,122 $ 31.22
 Granted   895,980   25.25
 Vested   (495,917)   37.81
 Forfeited   (23,150)   28.56
Nonvested, end of period   2,040,035   27.03
        
PPL Energy Supply      
Nonvested, beginning of period   580,417 $ 31.33
 Transferred   (86,690)   22.89
 Granted   326,120   25.14
 Vested   (136,767)   41.11
 Forfeited   (17,900)   28.51
Nonvested, end of period   665,180   27.30
        
PPL Electric      
Nonvested, beginning of period   169,325 $ 31.20
 Transferred   13,160   32.92
 Granted   126,100   25.09
 Vested   (51,740)   36.94
 Forfeited   (5,250)   28.76
Nonvested, end of period   251,595   27.10
        
LKE      
Nonvested, beginning of period   174,170 $ 26.31
 Vested   (28,960)   26.31
Nonvested, end of period   145,210   26.31

Substantially all restricted stock and restricted stock unit awards are expected to vest.

 

The total fair value of restricted stock/units vesting for the years ended December 31 was:

   2011 2010 2009
           
PPL $ 19 $ 15 $ 22
PPL Energy Supply   6   7   12
PPL Electric   2   2   2
LKE   1      

Performance Units

 

Performance units are intended to encourage and award future performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in an index group, in this case the S&P Electric Utilities Index. Awards granted in 2010 and 2009 were payable on a graduated basis within the following ranges: if PPL's performance is at or above the 85th percentile of the index group, the award is paid at 200% of the Target Award; at the 50th percentile of the index group, the award is paid at 100% of the Target Award; at the 40th percentile of the index group, the award is paid at 50% of the Target Award; and below the 40th percentile, no award is payable. Awards granted in 2011 provide for payment at 25% of the Target Award if performance falls below the 40th percentile of the index group. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the Plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period. The fair value of performance units granted is recognized on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis if control of PPL changes, as defined by the Plan.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and companies in the index group. PPL had used historical volatility to value its performance units in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands.

 

The weighted-average assumptions used in the model were:

    2011  2010  2009
           
Risk-free interest rate  1.00%  1.41%  1.11%
Expected stock volatility  23.40%  34.70%  31.30%
Expected life  3 years  3 years  3 years

The weighted-average grant date fair value of performance units granted was:

   2011 2010 2009
           
PPL $ 29.67 $ 34.06 $ 39.76
PPL Energy Supply   29.68   34.16   38.18
PPL Electric   29.57   33.54   39.95
LKE   29.20      

Performance unit activity for 2011 was:

      Weighted-
      Average Grant
   Performance Date Fair Value
   Units Per Share
PPL      
Nonvested, beginning of period   286,040 $ 39.40
 Granted   182,953   29.67
 Forfeited   (70,384)   48.61
Nonvested, end of period   398,609   33.31
        
PPL Energy Supply      
Nonvested, beginning of period   77,864 $ 39.08
 Transferred   (18,081)   40.37
 Granted   32,034   29.68
 Forfeited   (16,750)   46.95
Nonvested, end of period   75,067   33.00
        
PPL Electric      
Nonvested, beginning of period   22,231 $ 38.34
 Granted   14,730   29.57
 Forfeited   (4,153)   48.57
Nonvested, end of period   32,808   33.11
        
LKE      
Nonvested, beginning of period      
 Granted   26,893 $ 29.20
Nonvested, end of period   26,893   29.20

Stock Options

 

Under the Plans, stock options may be granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2011, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately if control of PPL changes, as defined by the Plans. The fair value of options granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, historical volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL had used historical volatility to value its stock options granted in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price through 2012. The assumptions used in the model were:

   2011 2010 2009
           
Risk-free interest rate  2.34%  2.52%  2.07%
Expected option life  5.71 years  5.43 years  5.25 years
Expected stock volatility  21.60%  28.57%  26.06%
Dividend yield  5.93%  5.61%  3.48%

The weighted-average grant date fair value of options granted was:

   2011 2010 2009
           
PPL $ 2.47 $ 4.70 $ 5.55
PPL Energy Supply   2.47   4.73   5.55
PPL Electric   2.47   4.62   5.65
LKE   2.47      

Stock option activity for 2011 was:

       Weighted-  
      Weighted Average   
     Average Remaining Aggregate
   Number Exercise Contractual Total Intrinsic
   of Options Price Per Share Term Value
PPL            
Outstanding at beginning of period   5,603,981 $ 32.31      
 Granted   2,068,080   25.78      
 Exercised   (69,220)   21.00      
 Forfeited   (72,643)   29.16      
Outstanding at end of period   7,530,198   30.65   6.5 $ 12
Options exercisable at end of period   4,493,789   32.74   5.0   5
              
PPL Energy Supply            
Outstanding at beginning of period   1,661,026 $ 31.92      
 Transferred   (296,705)   31.86      
 Granted   383,990   25.80      
 Exercised   (31,280)   21.58      
 Forfeited   (26,878)   28.25      
Outstanding at end of period   1,690,153   30.79   6.1 $ 2
Options exercisable at end of period   1,115,175   32.34   4.8   1
              
PPL Electric            
Outstanding at beginning of period   317,150 $ 33.53      
 Granted   168,120   25.74      
 Forfeited   (24,760)   26.66      
Outstanding at end of period   460,510   31.05   7.5 $ 1
Options exercisable at end of period   207,612   35.36   6.1   
              
LKE            
Outstanding at beginning of period            
 Granted   329,600 $ 25.77      
Outstanding at end of period   329,600   25.77   9.1 $ 1

PPL received $1 million in cash from stock options exercised in 2011. The related tax savings were not significant for 2011. Substantially all stock option awards are expected to vest.

 

The total intrinsic value of stock options exercised for the years ended December 31 2011, 2010, and 2009 was not significant.

Compensation Expense

 

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was as follows:

Compensation Expense

 

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was as follows:

   2011 2010 2009
           
PPL (a) $ 36 $ 26 $ 23
PPL Energy Supply (b)   16   20   17
PPL Electric (c)   8   6   5
LKE (d)   5      

(a)       Income tax benefits of $15 million, $11 million and $9 million.

(b)       Income tax benefits of $6 million, $8 million and $7 million.

(c)       Income tax benefits of $3 million, $3 million and $2 million.

(d)       Income tax benefits of $2 million.

 

The income tax benefit PPL realized from stock-based awards vested or exercised for 2011 was not significant.

At December 31, 2011, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:

       
     Weighted-
   Unrecognized Average
   Compensation Period for
   Expense Recognition
        
PPL $ 19  1.7 years
PPL Energy Supply   6  1.7 years
PPL Electric   3  2.3 years
LKE   2  1.2 years
LKE [Member]
  
Stock Based Compensation [Line Items]  
Stock-Based Compensation

12. Stock-Based Compensation

 

(PPL, PPL Energy Supply, PPL Electric and LKE)

 

Under the PPL Incentive Compensation Plan (ICP) and the Incentive Compensation Plan for Key Employees (ICPKE) (together, the Plans), restricted shares of PPL common stock, restricted stock units, performance units and stock options may be granted to officers and other key employees of PPL, PPL Energy Supply, PPL Electric, LKE and other affiliated companies. Awards under the Plans are made by the Compensation, Governance and Nominating Committee (CGNC) of the PPL Board of Directors, in the case of the ICP, and by the PPL Corporate Leadership Council (CLC), in the case of the ICPKE.

 

The ICP limits the total number of awards that may be granted under it after April 23, 1999 to 15,769,431. The ICPKE limits the total number of awards that may be granted under it after April 25, 2003 to 14,199,796. In addition, each Plan limits the number of shares available for awards in any calendar year to 2% of the outstanding common stock of PPL on the first day of such calendar year. The maximum number of options that can be awarded under each Plan to any single eligible employee in any calendar year is three million shares. Any portion of these options that has not been granted may be carried over and used in any subsequent year. If any award lapses, is forfeited or the rights of the participant terminate, the shares of PPL common stock underlying such an award are again available for grant. Shares delivered under the Plans may be in the form of authorized and unissued PPL common stock, common stock held in treasury by PPL or PPL common stock purchased on the open market (including private purchases) in accordance with applicable securities laws.

 

Restricted Stock and Restricted Stock Units

 

Restricted shares of PPL common stock are outstanding shares with full voting and dividend rights. Restricted stock awards are granted as a retention award for select key executives and vest when the recipient reaches a certain age or meets service or other criteria set forth in the executive's restricted stock award agreement. The shares are subject to forfeiture or accelerated payout under Plan provisions for termination, retirement, disability and death of employees. Restricted shares vest fully if control of PPL changes, as defined by the Plans.

 

The Plans allow for the grant of restricted stock units. Restricted stock units are awards based on the fair value of PPL common stock on the date of grant. Actual PPL common shares will be issued upon completion of a vesting period, generally three years. The fair value of restricted stock units granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of restricted stock units granted to retirement-eligible employees is recognized immediately upon the date of grant. Recipients of restricted stock units may also be granted the right to receive dividend equivalents through the end of the restriction period or until the award is forfeited. Restricted stock units are subject to forfeiture or accelerated payout under the Plan provisions for termination, retirement, disability and death of employees. Restricted stock units vest fully if control of PPL changes, as defined by the Plans.

The weighted-average grant date fair value of restricted stock and restricted stock units granted was:

   2011 2010 2009
           
PPL $ 25.25 $ 28.93 $ 29.07
PPL Energy Supply   25.14   29.49   28.49
PPL Electric   25.09   29.40   29.49
LKE      26.31   

Restricted stock and restricted stock unit activity for 2011 was:

      Weighted-
      Average
    Restricted Grant Date Fair
    Shares/Units Value Per Share
PPL      
Nonvested, beginning of period   1,663,122 $ 31.22
 Granted   895,980   25.25
 Vested   (495,917)   37.81
 Forfeited   (23,150)   28.56
Nonvested, end of period   2,040,035   27.03
        
PPL Energy Supply      
Nonvested, beginning of period   580,417 $ 31.33
 Transferred   (86,690)   22.89
 Granted   326,120   25.14
 Vested   (136,767)   41.11
 Forfeited   (17,900)   28.51
Nonvested, end of period   665,180   27.30
        
PPL Electric      
Nonvested, beginning of period   169,325 $ 31.20
 Transferred   13,160   32.92
 Granted   126,100   25.09
 Vested   (51,740)   36.94
 Forfeited   (5,250)   28.76
Nonvested, end of period   251,595   27.10
        
LKE      
Nonvested, beginning of period   174,170 $ 26.31
 Vested   (28,960)   26.31
Nonvested, end of period   145,210   26.31

Substantially all restricted stock and restricted stock unit awards are expected to vest.

 

The total fair value of restricted stock/units vesting for the years ended December 31 was:

   2011 2010 2009
           
PPL $ 19 $ 15 $ 22
PPL Energy Supply   6   7   12
PPL Electric   2   2   2
LKE   1      

Performance Units

 

Performance units are intended to encourage and award future performance. Performance units represent a target number of shares (Target Award) of PPL's common stock that the recipient would receive upon PPL's attainment of the applicable performance goal. Performance is determined based on total shareowner return during a three-year performance period. At the end of the period, payout is determined by comparing PPL's performance to the total shareowner return of the companies included in an index group, in this case the S&P Electric Utilities Index. Awards granted in 2010 and 2009 were payable on a graduated basis within the following ranges: if PPL's performance is at or above the 85th percentile of the index group, the award is paid at 200% of the Target Award; at the 50th percentile of the index group, the award is paid at 100% of the Target Award; at the 40th percentile of the index group, the award is paid at 50% of the Target Award; and below the 40th percentile, no award is payable. Awards granted in 2011 provide for payment at 25% of the Target Award if performance falls below the 40th percentile of the index group. Dividends payable during the performance cycle accumulate and are converted into additional performance units and are payable in shares of PPL common stock upon completion of the performance period based on the determination of the CGNC of whether the performance goals have been achieved. Under the Plan provisions, performance units are subject to forfeiture upon termination of employment except for retirement, disability or death of an employee, in which case the total performance units remain outstanding and are eligible for vesting through the conclusion of the performance period. The fair value of performance units granted is recognized on a straight-line basis over the three-year performance period. Performance units vest on a pro rata basis if control of PPL changes, as defined by the Plan.

The fair value of each performance unit granted was estimated using a Monte Carlo pricing model that considers stock beta, a risk-free interest rate, expected stock volatility and expected life. The stock beta was calculated comparing the risk of the individual securities to the average risk of the companies in the index group. The risk-free interest rate reflects the yield on a U.S. Treasury bond commensurate with the expected life of the performance unit. Volatility over the expected term of the performance unit is calculated using daily stock price observations for PPL and all companies in the index group and is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL and companies in the index group. PPL had used historical volatility to value its performance units in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands.

 

The weighted-average assumptions used in the model were:

    2011  2010  2009
           
Risk-free interest rate  1.00%  1.41%  1.11%
Expected stock volatility  23.40%  34.70%  31.30%
Expected life  3 years  3 years  3 years

The weighted-average grant date fair value of performance units granted was:

   2011 2010 2009
           
PPL $ 29.67 $ 34.06 $ 39.76
PPL Energy Supply   29.68   34.16   38.18
PPL Electric   29.57   33.54   39.95
LKE   29.20      

Performance unit activity for 2011 was:

      Weighted-
      Average Grant
   Performance Date Fair Value
   Units Per Share
PPL      
Nonvested, beginning of period   286,040 $ 39.40
 Granted   182,953   29.67
 Forfeited   (70,384)   48.61
Nonvested, end of period   398,609   33.31
        
PPL Energy Supply      
Nonvested, beginning of period   77,864 $ 39.08
 Transferred   (18,081)   40.37
 Granted   32,034   29.68
 Forfeited   (16,750)   46.95
Nonvested, end of period   75,067   33.00
        
PPL Electric      
Nonvested, beginning of period   22,231 $ 38.34
 Granted   14,730   29.57
 Forfeited   (4,153)   48.57
Nonvested, end of period   32,808   33.11
        
LKE      
Nonvested, beginning of period      
 Granted   26,893 $ 29.20
Nonvested, end of period   26,893   29.20

Stock Options

 

Under the Plans, stock options may be granted with an option exercise price per share not less than the fair value of PPL's common stock on the date of grant. Options outstanding at December 31, 2011, become exercisable in equal installments over a three-year service period beginning one year after the date of grant, assuming the individual is still employed by PPL or a subsidiary. The CGNC and CLC have discretion to accelerate the exercisability of the options, except that the exercisability of an option issued under the ICP may not be accelerated unless the individual remains employed by PPL or a subsidiary for one year from the date of grant. All options expire no later than ten years from the grant date. The options become exercisable immediately if control of PPL changes, as defined by the Plans. The fair value of options granted is recognized on a straight-line basis over the service period or through the date at which the employee reaches retirement eligibility. The fair value of options granted to retirement-eligible employees is recognized immediately upon the date of grant.

The fair value of each option granted is estimated using a Black-Scholes option-pricing model. PPL uses a risk-free interest rate, expected option life, historical volatility and dividend yield to value its stock options. The risk-free interest rate reflects the yield for a U.S. Treasury Strip available on the date of grant with constant rate maturity approximating the option's expected life. Expected life is calculated based on historical exercise behavior. Volatility over the expected term of the options is evaluated with consideration given to prior periods that may need to be excluded based on events not likely to recur that had impacted PPL's volatility in those prior periods. Management's expectations for future volatility, considering potential changes to PPL's business model and other economic conditions, are also reviewed in addition to the historical data to determine the final volatility assumption. PPL had used historical volatility to value its stock options granted in 2010 and 2009. Beginning in 2011, PPL began using a mix of historic and implied volatility in response to the significant changes in its business model, moving from a primarily unregulated to a primarily regulated business model, as a result of the acquisitions of LKE and WPD Midlands. The dividend yield is based on several factors, including PPL's most recent dividend payment, as of the grant date and the forecasted stock price through 2012. The assumptions used in the model were:

   2011 2010 2009
           
Risk-free interest rate  2.34%  2.52%  2.07%
Expected option life  5.71 years  5.43 years  5.25 years
Expected stock volatility  21.60%  28.57%  26.06%
Dividend yield  5.93%  5.61%  3.48%

The weighted-average grant date fair value of options granted was:

   2011 2010 2009
           
PPL $ 2.47 $ 4.70 $ 5.55
PPL Energy Supply   2.47   4.73   5.55
PPL Electric   2.47   4.62   5.65
LKE   2.47      

Stock option activity for 2011 was:

       Weighted-  
      Weighted Average   
     Average Remaining Aggregate
   Number Exercise Contractual Total Intrinsic
   of Options Price Per Share Term Value
PPL            
Outstanding at beginning of period   5,603,981 $ 32.31      
 Granted   2,068,080   25.78      
 Exercised   (69,220)   21.00      
 Forfeited   (72,643)   29.16      
Outstanding at end of period   7,530,198   30.65   6.5 $ 12
Options exercisable at end of period   4,493,789   32.74   5.0   5
              
PPL Energy Supply            
Outstanding at beginning of period   1,661,026 $ 31.92      
 Transferred   (296,705)   31.86      
 Granted   383,990   25.80      
 Exercised   (31,280)   21.58      
 Forfeited   (26,878)   28.25      
Outstanding at end of period   1,690,153   30.79   6.1 $ 2
Options exercisable at end of period   1,115,175   32.34   4.8   1
              
PPL Electric            
Outstanding at beginning of period   317,150 $ 33.53      
 Granted   168,120   25.74      
 Forfeited   (24,760)   26.66      
Outstanding at end of period   460,510   31.05   7.5 $ 1
Options exercisable at end of period   207,612   35.36   6.1   
              
LKE            
Outstanding at beginning of period            
 Granted   329,600 $ 25.77      
Outstanding at end of period   329,600   25.77   9.1 $ 1

PPL received $1 million in cash from stock options exercised in 2011. The related tax savings were not significant for 2011. Substantially all stock option awards are expected to vest.

 

The total intrinsic value of stock options exercised for the years ended December 31 2011, 2010, and 2009 was not significant.

Compensation Expense

 

Compensation expense for restricted stock, restricted stock units, performance units and stock options accounted for as equity awards was as follows:

   2011 2010 2009
           
PPL (a) $ 36 $ 26 $ 23
PPL Energy Supply (b)   16   20   17
PPL Electric (c)   8   6   5
LKE (d)   5      

(a)       Income tax benefits of $15 million, $11 million and $9 million.

(b)       Income tax benefits of $6 million, $8 million and $7 million.

(c)       Income tax benefits of $3 million, $3 million and $2 million.

(d)       Income tax benefits of $2 million.

 

The income tax benefit PPL realized from stock-based awards vested or exercised for 2011 was not significant.

At December 31, 2011, unrecognized compensation expense related to nonvested restricted stock, restricted stock units, performance units and stock option awards was:

       
     Weighted-
   Unrecognized Average
   Compensation Period for
   Expense Recognition
        
PPL $ 19  1.7 years
PPL Energy Supply   6  1.7 years
PPL Electric   3  2.3 years
LKE   2  1.2 years