Share-Based Compensation

3 Months Ended

Mar. 31, 2012

Share-based Compensation [Abstract]

Share-Based Compensation

Note 8 - Share-Based Compensation

Questar may issue stock options, restricted shares, restricted stock units and performance shares to certain officers, employees and non-employee directors under its LTSIP. Questar recognizes expense over time as the stock options, restricted shares, restricted stock units and performance shares vest. Total share-based compensation expense amounted to $2.7 million for the first quarter of 2012 compared to $3.5 million in 2011. Deferred share-based compensation, representing the unvested value of restricted share awards and restricted stock unit awards, amounted to $8.3 million at March 31, 2012. Deferred share-based compensation is included in common stock on the Condensed Consolidated Balance Sheets. First quarter cash flow from income tax benefits in excess of recognized compensation expense amounted to $3.5 million in 2012 compared to $4.0 million in 2011. There were 6,731,415 shares available for future grants at March 31, 2012.

The Company uses the Black-Scholes-Merton mathematical model in estimating the fair value of stock options for accounting purposes. Fair value calculations rely upon subjective assumptions used in the mathematical model and may not be representative of future results. The Black-Scholes-Merton model was intended for measuring the value of options traded on an exchange. Questar did not grant any stock options in the first quarter of 2012.

Unvested stock options decreased by 88,396 shares to 29,398 shares in the first quarter of 2012. Stock-option transactions under the terms of the LTSIP are summarized below:

	Options Outstanding		Price Range					Weighted-average Price
Balance at December 31, 2011	1,773,635		$	3.70	-	$	17.35	$	8.54
Exercised	(149,117	)	3.70		-	13.10		4.71
Balance at March 31, 2012	1,624,518		$	4.37	-	$	17.35	$	8.89

Options Outstanding									Options Exercisable			Unvested Options
Range of exercise prices					Number outstanding at March 31, 2012	Weighted-average remaining term in years	Weighted-average exercise price		Number exercisable at March 31, 2012	Weighted-average exercise price		Number unvested at March 31, 2012	Weighted- average exercise price
$	4.37	-	$	7.84	756,811	1.1	$	4.82	756,811	$	4.82	—	$	—
11.40		-	12.43		539,174	2.7	11.78		539,174	11.78		—	—
13.10		-	17.35		328,533	4.3	13.52		299,135	13.56		29,398	13.10
					1,624,518	2.3	$	8.89	1,595,120	$	8.81	29,398	$	13.10

Restricted share grants typically vest in equal installments over a three- or four-year period from the grant date. Several grants vest in a single installment after a specified period. The weighted-average remaining vesting period of unvested restricted shares at March 31, 2012, was 20 months. Transactions involving restricted shares under the terms of the LTSIP are summarized below:

	Restricted Shares Outstanding		Price Range					Weighted-average Price
Balance at December 31, 2011	771,550		$	11.40	-	$	17.97	$	16.22
Granted	357,678					19.39		19.39
Distributed	(257,510	)	11.40		-	17.97		16.21
Balance at March 31, 2012	871,718		$	13.10	-	$	19.39	$	17.52

Restricted stock unit grants typically vest in equal installments over a three-year period from the grant date. At March 31, 2012, Questar's outstanding restricted stock units totaled 69,670 with a weighted-average price of $15.38 per share and a weighted-average remaining vesting period of nine months.

In the first quarter of 2012, Questar granted to certain Company executive officers a total of 136,846 performance shares under the terms of the LTSIP. The awards were designed to motivate and reward these executives for long-term Company performance and provide an incentive for them to remain with the Company. The target number of performance shares for each executive officer is subject to adjustment upward or downward based on the Company's performance over the three-year performance period ending December 31, 2014 with respect to specified performance criteria relative to a specified peer group of companies. The actual performance shares awarded, if any, will be distributed in the first quarter of 2015 so long as such executive officer was employed by the Company or its affiliates as of December 31, 2014. Half of any award will be distributed in shares of Company common stock and half in cash. The Monte Carlo simulation method was used to estimate the grant-date fair value of the performance share awards at $25.42 per share. The liability awards to be settled in cash will be marked-to-market at least annually using the Monte Carlo simulation method. Equity- and liability-based performance share compensation expense amounted to $0.4 million in the first quarter of 2012 and $0.2 million in the first quarter of 2011.