Note 8 – Stock-based Compensation

Under the Company’s 2009 Omnibus Equity Compensation Plan, as amended as of February 27, 2014, (the “2009 Plan”), as approved by the Company’s shareholders to replace the 2004 Equity Compensation Plan (the “2004 Plan”), stock options, stock units, stock awards, stock appreciation rights, dividend equivalents, and other stock-based awards may be granted to employees, non-employee directors, and consultants and advisors. The 2009 Plan authorizes 6,250,000 shares for issuance under the plan. A maximum of 3,125,000 shares under the 2009 Plan may be issued pursuant to stock awards, stock units and other stock-based awards, subject to adjustment as provided in the 2009 Plan. During any calendar year, no individual may be granted (i) stock options and stock appreciation rights under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate or (ii) stock awards, stock units or other stock-based awards under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate, subject to adjustment as provided in the 2009 Plan. Awards under the 2009 Plan are made by a committee of the Board of Directors of the Company, or in the case of awards to non-employee directors, by the Board of Directors of the Company. At March 31, 2015, 4,252,788 shares underlying stock-based compensation awards were still available for grants under the 2009 Plan. No further grants may be made under the 2004 Plan.

Performance Share Units – A performance share unit (“PSU”) represents the right to receive a share of the Company’s common stock if specified performance goals are met over the three year performance period specified in the grant, subject to exceptions through the respective vesting period, generally three years. Each grantee is granted a target award of PSUs, and may earn between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. The following table provides compensation costs for stock-based compensation related to PSUs:



	Three Months Ended
	March 31,
	2015		2014
Stock-based compensation within operations and maintenance expenses	$	1,078	$	1,002
Income tax benefit		439		410

The following table summarizes nonvested PSU transactions for the three months ended March 31, 2015:



	Number	Weighted
	of	Average
	Share Units	Fair Value

Nonvested share units at beginning of period	582,644	$	22.98
Granted	123,820		26.54
Performance criteria adjustment	5,114		25.59
Forfeited	(3,713)		25.69
Share units vested	(34,500)		26.88
Share units issued	(217,014)		18.49
Nonvested share units at end of period	456,351	$	25.79

A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions associated with the PSUs using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date, regardless of whether the market-based condition is satisfied. The per unit weighted-average fair value at the date of grant for PSUs granted during the three months ended March 31, 2015 and 2014 was $26.54 and $25.31, respectively. The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over their respective vesting periods, generally 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award, and is adjusted as required for the portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs. The recording of compensation expense for PSUs has no impact on net cash flows.

Restricted Stock Units – A restricted stock unit (“RSU”) represents the right to receive a share of the Company’s common stock. RSUs are eligible to be earned at the end of a specified restricted period, generally three years, beginning on the date of grant. In some cases the right to receive the shares is subject to certain performance goals established at the time the grant is made. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the RSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the RSUs. The following table provides compensation costs for stock-based compensation related to RSUs:



	Three Months Ended
	March 31,
	2015		2014
Stock-based compensation within operations and maintenance expenses	$	263	$	236
Income tax benefit		109		98

The following table summarizes nonvested RSU transactions for the three months ended March 31, 2015:



	Number	Weighted
	of	Average
	Stock Units	Fair Value

Nonvested stock units at beginning of period	122,565	$	22.29
Granted	37,650		26.26
Stock units vested but not paid	11,500		17.99
Stock units vested and paid	(63,387)		19.44
Forfeited	-		-
Nonvested stock units at end of period	108,328	$	24.88

The per unit weighted-average fair value at the date of grant for RSUs granted during the three months ended March 31, 2015 and 2014 was $26.26 and $24.80, respectively.

Stock Options – The following table provides the income tax benefit for stock-based compensation related to stock options granted in prior periods:



	Three Months Ended
	March 31,
	2015		2014
Income tax benefit	$	104	$	73

For the three months ended March 31, 2015 and 2014, there were no compensation costs for stock-based compensation related to stock options, as stock options were fully amortized in 2013. Additionally, there were no stock options granted during the three months ended March 31, 2015 or 2014.

The following table summarizes stock option transactions for the three months ended March 31, 2015:



		Weighted		Weighted
		Average		Average	Aggregate
		Exercise		Remaining	Intrinsic
	Shares	Price		Life (years)	Value
Outstanding at beginning of period	1,084,992	$	17.06
Forfeited	-		-
Expired	-		-
Exercised	(170,270)		16.75
Outstanding and exercisable at end of period	914,722	$	17.12	3.1	$	8,443

Restricted Stock – The following table provides compensation costs for stock-based compensation related to restricted stock:


	Three Months Ended
	March 31,
	2015		2014
Stock-based compensation within operations and maintenance expenses	$	-	$	92
Income tax benefit		-		38

For the three months ended March 31, 2015, there were no compensation costs for stock-based compensation related to restricted stock, as restricted stock was fully amortized in 2014. Additionally, there was no restricted stock granted during the three months ended March 31, 2015 or 2014.

The following table summarizes nonvested restricted stock transactions for the three months ended March 31, 2015:



	Number	Weighted
	of	Average
	Shares	Fair Value

Nonvested shares at beginning of period	31,250	$	17.70
Granted	-		-
Vested	(31,250)		17.70
Forfeited	-		-
Nonvested shares at end of period	-	$	-