Common Stock And Share-Based Compensation

12 Months Ended

Dec. 31, 2014

Common Stock And Share-Based Compensation

NOTE 5: COMMON STOCK AND SHARE-BASED COMPENSATION

PG&E Corporation had 475,913,404 shares of common stock outstanding at December 31, 2014. PG&E Corporation held all of the Utility's outstanding common stock at December 31, 2014.

In February 2014, PG&E Corporation entered into a new equity distribution agreement providing for the sale of PG&E Corporation common stock having an aggregate gross sales price of up to $500 million. During 2014, PG&E Corporation sold 11 million shares under the February 2014 equity distribution agreement for cash proceeds of $496 million, exhausting the capacity under this agreement. This amount is net of commissions paid of $4 million.

In addition, PG&E Corporation issued common stock under the PG&E Corporation 401(k) plan, the Dividend Reinvestment and Stock Purchase Plan, and share-based compensation plans. During 2014, 8 million shares were issued for cash proceeds of $306 million under these plans.

Dividends

The Board of Directors of PG&E Corporation and the Utility declare dividends quarterly. Under the Utility's Articles of Incorporation, the Utility cannot pay common stock dividends unless all cumulative preferred dividends on the Utility's preferred stock have been paid. For 2014, the Board of Directors of PG&E Corporation declared a quarterly common stock dividend of $0.455 per share.

Under their respective credit agreements, PG&E Corporation and the Utility are each required to maintain a ratio of consolidated total debt to consolidated capitalization of at most 65%. In addition, the CPUC requires the Utility to maintain a capital structure composed of at least 52% equity on a weighted average over four years. PG&E Corporation and the Utility are in compliance with these restrictions. At December 31, 2014, the Utility had restricted net assets of $14.6 billion and was limited to $153 million of additional common stock dividends it could pay to PG&E Corporation at December 31, 2014.

Long-Term Incentive Plan

The PG&E Corporation LTIP permits various forms of share-based incentive awards, including restricted stock awards, restricted stock units, performance shares, and other share-based awards, to eligible employees of PG&E Corporation and its subsidiaries. Non-employee directors of PG&E Corporation are also eligible to receive certain share-based awards. In May 2014, the 2006 LTIP was terminated and the 2014 LTIP became effective. A maximum of 17 million shares of PG&E Corporation common stock (subject to certain adjustments) has been reserved for issuance under the 2014 LTIP, of which 16,184,126 shares were available for future awards at December 31, 2014.

The following table provides a summary of total share-based compensation expense recognized by PG&E Corporation for share-based incentive awards for 2014, 2013, and 2012:

(in millions)	2014		2013		2012
Restricted stock units	$	42	$	36	$	31
Performance shares		36		28		26
Total compensation expense (pre-tax)	$	78	$	64	$	57
Total compensation expense (after-tax)	$	47	$	38	$	34

The amount of share-based compensation costs capitalized during 2014, 2013, and 2012 was immaterial. There was no material difference between PG&E Corporation and the Utility for the information disclosed above.

Restricted Stock Units

Prior to 2014, restricted stock units generally vested over four years in 20% increments on the first business day of March in year one, two, and three, with the remaining 40% vesting on the first business day of March in year four. Restricted stock units granted in 2014 generally vest equally over three years. Vested restricted stock units are settled in shares of PG&E Corporation common stock accompanied by cash payments to settle any dividend equivalents associated with the vested restricted stock units. Compensation expense is generally recognized rateably over the vesting period based on grant-date fair value. The weighted average grant-date fair value for restricted stock units granted during 2014, 2013, and 2012 was $43.76, $42.92, and $42.17, respectively. The total fair value of restricted stock units that vested during 2014, 2013, and 2012 was $34 million, $30 million, and $18 million, respectively. The tax benefit from restricted stock units that vested during each period was not material. As of December 31, 2014, $51 million of total unrecognized compensation costs related to nonvested restricted stock units was expected to be recognized over the remaining weighted average period of 1.77 years.

The following table summarizes restricted stock unit activity for 2014:

	Number of		Weighted Average Grant-
	Restricted Stock Units		Date Fair Value
Nonvested at January 1	2,300,021		$	43.16
Granted	1,092,035		$	43.76
Vested	(777,883	)	$	43.28
Forfeited	(75,816	)	$	43.01
Nonvested at December 31	2,538,357		$	43.38

Performance Shares

Performance shares generally will vest three years after the grant date. Upon vesting, performance shares are settled in shares of common stock based on PG&E Corporation's total shareholder return relative to a specified group of industry peer companies over a three-year performance period. Dividend equivalents are paid in cash based on the amount of common stock to which the recipients are entitled.

Compensation expense attributable to performance share is generally recognized rateably over the applicable three-year period based on the grant-date fair value determined using a Monte Carlo simulation valuation model. The weighted average grant-date fair value for performance shares granted during 2014, 2013, and 2012 was $51.81, $33.45, and $41.93 respectively. There was no tax benefit associated with performance shares during each of these periods. As of December 31, 2014, $34 million of total unrecognized compensation costs related to nonvested performance shares was expected to be recognized over the remaining weighted average period of 1.18 years.

The following table summarizes activity for performance shares in 2014:

	Number of		Weighted Average Grant-
	Performance Shares		Date Fair Value
Nonvested at January 1	1,791,320		$	37.85
Granted	843,185			51.81
Vested	(275,247	)		41.94
Forfeited ⁽¹⁾	(665,319	)		42.34
Nonvested at December 31	1,693,939		$	42.37

⁽¹⁾ Includes performance shares that expired with zero value as performance targets were not met.