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Common Equity
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity Note [Abstract]  
COMMON EQUITY
COMMON EQUITY
 
 
 
 
 
 
 
 

Stock Option Activity:   During the first six months of 2012, the Compensation Committee granted 938,770 non-qualified stock options that had an estimated fair value of $3.34 per share. During the first six months of 2011, the Compensation Committee granted 458,180 non-qualified stock options that had an estimated fair value of $3.17 per share. The following assumptions were used to value the options using a binomial option pricing model:

 
2012
 
2011
 
 
 
 
Risk-free interest rate
0.1% - 2.0%

 
0.2% - 3.4%

Dividend yield
3.9
%
 
3.9
%
Expected volatility
19.0
%
 
19.0
%
Expected forfeiture rate
2.0
%
 
2.0
%
Expected life (years)
5.9

 
5.5



The risk-free interest rate is based on the U.S. Treasury interest rate whose term is consistent with the expected life of the stock options. Dividend yield, expected volatility, expected forfeiture rate and expected life assumptions are based on our historical experience.

The following is a summary of our stock option activity for the three and six months ended June 30, 2012:

 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
 
Average
 
 
 
 
 
 
Weighted-
 
Remaining
 
Aggregate
 
 
Number of
 
Average
 
Contractual Life
 
Intrinsic Value
Stock Options
 
Options
 
Exercise Price
 
(Years)
 
(Millions)
Outstanding as of April 1, 2012
 
10,851,131

 
$
23.03

 
 
 
 
Granted
 
—

 
$
—

 
 
 
 
Exercised
 
(1,279,600
)
 
$
20.09

 
 
 
 
Forfeited
 
—

 
$
—

 
 
 
 
Outstanding as of June 30, 2012
 
9,571,531

 
$
23.42

 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding as of January 1, 2012
 
10,638,750

 
$
21.65

 
 
 
 
Granted
 
938,770

 
$
34.88

 
 
 
 
Exercised
 
(1,998,269
)
 
$
19.34

 
 
 
 
Forfeited
 
(7,720
)
 
$
26.94

 
 
 
 
Outstanding as of June 30, 2012
 
9,571,531

 
$
23.42

 
5.6
 
$
154.5

 
 
 
 
 
 
 
 
 
Exercisable as of June 30, 2012
 
7,845,366

 
$
21.76

 
4.9
 
$
139.7



The intrinsic value of options exercised was $21.6 million and $33.6 million for the three and six months ended June 30, 2012, and $9.9 million and $19.0 million for the same periods in 2011, respectively. Cash received from options exercised was $38.6 million and $29.6 million for the six months ended June 30, 2012 and 2011, respectively. The actual tax benefit realized for the tax deductions from option exercises for the same periods was zero and approximately $7.5 million, respectively.

All outstanding stock options to purchase shares of common stock were included in the computation of diluted earnings per share during the second quarter and first six months of 2012.

The following table summarizes information about stock options outstanding as of June 30, 2012:

 
 
Options Outstanding
 
Options Exercisable
 
 
 
 
Weighted-Average
 
 
 
Weighted-Average
 
 
 
 
 
 
Remaining
 
 
 
 
 
Remaining
 
 
Number of
 
Exercise
 
Contractual
 
Number of
 
Exercise
 
Contractual
Range of Exercise Prices
 
Options
 
Price
 
Life (Years)
 
Options
 
Price
 
Life (Years)
$12.71 to $19.74
 
2,188,544

 
$
18.08

 
2.7
 
2,188,544

 
$
18.08

 
2.7
$21.11 to $24.92
 
5,995,997

 
$
23.14

 
5.8
 
5,541,467

 
$
22.99

 
5.6
$29.35 to $34.88
 
1,386,990

 
$
33.09

 
9.2
 
115,355

 
$
32.60

 
9.1
 
 
9,571,531

 
$
23.42

 
5.6
 
7,845,366

 
$
21.76

 
4.9


The following table summarizes information about our non-vested options during the three and six months ended June 30, 2012:

 
 
 
 
Weighted-Average
Non-Vested Stock Options
 
Number of Options
 
Fair Value
Non-vested as of April 1, 2012
 
1,732,770

 
$
3.31

Granted
 
—

 
$
—

Vested
 
(6,605
)
 
$
3.30

Forfeited
 
—

 
$
—

Non-vested as of June 30, 2012
 
1,726,165

 
$
3.31

 
 
 
 
 
Non-vested as of January 1, 2012
 
3,103,770

 
$
3.78

Granted
 
938,770

 
$
3.34

Vested
 
(2,308,655
)
 
$
3.96

Forfeited
 
(7,720
)
 
$
3.25

Non-vested as of June 30, 2012
 
1,726,165

 
$
3.31



As of June 30, 2012, total compensation costs related to non-vested stock options not yet recognized was approximately $2.4 million, which is expected to be recognized over the next 18 months on a weighted-average basis.

Restricted Shares:   During the first six months of 2012, the Compensation Committee granted 94,959 restricted shares to directors, officers and other key employees. These awards have a three-year vesting period, and generally, one-third of the award vests on each anniversary of the grant date. During the vesting period, restricted share recipients have voting rights and are entitled to dividends in the same manner as other shareholders.

The following restricted stock activity occurred during the three and six months ended June 30, 2012:

 
 
 
 
Weighted-Average
Restricted Shares
 
Number of Shares
 
Grant Date Fair Value
Outstanding as of April 1, 2012
 
210,912

 
 
Granted
 
—

 
$
—

Released
 
(15,762
)
 
$
19.38

Forfeited
 
(453
)
 
$
31.02

Outstanding as of June 30, 2012
 
194,697

 
 
 
 
 
 
 
Outstanding as of January 1, 2012
 
192,558

 
 
Granted
 
94,959

 
$
34.46

Released
 
(88,422
)
 
$
30.65

Forfeited
 
(4,398
)
 
$
30.83

Outstanding as of June 30, 2012
 
194,697

 
 


We record the market value of the restricted stock awards on the date of grant, and then we charge their value to expense over the vesting period of the awards. The intrinsic value of restricted stock vesting was $0.7 million and $3.3 million for the three and six months ended June 30, 2012, and $0.2 million and $2.3 million for the same periods in 2011, respectively. The actual tax benefit realized for the tax deductions from released restricted shares was zero for the three and six months ended June 30, 2012, and $0.1 million and $0.7 million for the same periods in 2011, respectively.

As of June 30, 2012, total compensation cost related to restricted stock not yet recognized was approximately $3.9 million, which is expected to be recognized over the next 24 months on a weighted-average basis.

Performance Units:   In January 2012 and 2011, the Compensation Committee granted 346,570 and 435,690 performance units, respectively, to officers and other key employees under the Wisconsin Energy Performance Unit Plan. Under the grants, the ultimate number of units that will be awarded is dependent upon the achievement of certain financial performance of our stock over a three-year period. Under the terms of the award, participants may earn between 0% and 175% of the base performance unit award. All grants are settled in cash. We are accruing compensation costs over the three-year period based on our estimate of the final expected value of the awards. Performance units earned as of December 31, 2011 and 2010 vested and were settled during the first quarter of 2012 and 2011, and had a total intrinsic value of $26.7 million and $12.6 million, respectively. The actual tax benefit realized for the tax deductions from the settlement of performance units was approximately $9.7 million and $4.3 million, respectively. As of June 30, 2012, total compensation cost related to performance units not yet recognized was approximately $29.1 million, which is expected to be recognized over the next 20 months on a weighted-average basis.

Restrictions:   Wisconsin Energy's ability as a holding company to pay common dividends primarily depends on the availability of funds received from its non-utility subsidiary, We Power, and its utility subsidiaries. Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. In addition, under Wisconsin law, Wisconsin Electric and Wisconsin Gas are prohibited from loaning funds, either directly or indirectly, to Wisconsin Energy. See Note I -- Common Equity in our 2011 Annual Report on Form 10-K for additional information on these and other restrictions.

We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.

Comprehensive Income:   Comprehensive income includes all changes in equity during a period except those resulting from investments by and distributions to owners.

There was no material other comprehensive income for the three and six months ended June 30, 2012 or 2011.

Share Repurchase Program:   In May 2011, our Board of Directors authorized a share repurchase program that allows us to repurchase up to $300 million of our common stock through the end of 2013. Through June 30, 2012, we have repurchased $100.0 million of our common stock pursuant to this program at an average cost of $30.79 per share. The share repurchase program does not obligate Wisconsin Energy to acquire any specific number of shares and may be suspended or terminated by the Board of Directors at any time. In addition, through our independent agents, we purchase shares on the open market to fulfill exercised stock options and restricted stock awards. The following table identifies the shares purchased by the Company in the following periods:

 
Six Months Ended June 30
 
2012
 
2011
 
Shares
 
Cost
 
Shares
 
Cost
 
(In Millions)
 
 
 
 
 
 
 
 
Under May 2011 share repurchase program
—

 
$
—

 
—

 
$
—

To fulfill exercised stock options and restricted stock awards
2.1

 
75.7

 
1.6

 
50.8

Total
2.1

 
$
75.7

 
1.6

 
$
50.8