8. COMMON STOCK

Stock Issued

During 2011, Southern Company issued 21.9 million shares of common stock for $723 million through the Southern Investment Plan and employee and director stock plans. In 2010, Southern Company raised $629 million from the issuance of 19.6 million new common shares through the Southern Investment Plan and employee and director stock plans. Additionally, in 2010, Southern Company issued 4.1 million shares of common stock through at-the-market issuances pursuant to sales agency agreements related to Southern Company’s continuous equity offering program and received cash proceeds of $143 million, net of $1 million in fees and commissions.

Shares Reserved

At December 31, 2011, a total of 107 million shares were reserved for issuance pursuant to the Southern Investment Plan, the Employee Savings Plan, the Outside Directors Stock Plan, and the Omnibus Incentive Compensation Plan (which includes stock options and performance shares units as discussed below). Of the total 107 million shares reserved, there were 47 million shares of common stock remaining available for awards under the Omnibus Incentive Compensation Plan as of December 31, 2011.

Stock Options

Southern Company provides non-qualified stock options through its Omnibus Incentive Compensation Plan to a large segment of Southern Company system employees ranging from line management to executives. As of December 31, 2011, there were 6,955 current and former employees participating in the stock option program. The prices of options were at the fair market value of the shares on the dates of grant. These options become exercisable pro rata over a maximum period of three years from the date of grant. Southern Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement, the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the Omnibus Incentive Compensation Plan. For certain stock option awards, a change in control will provide accelerated vesting.

The estimated fair values of stock options granted were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term. Southern Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options.

The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:


Year Ended December 31	2011			2010			2009

Expected volatility		17.5	%		17.4	%		15.6%
Expected term (in years)		5.0			5.0			5.0
Interest rate		2.3	%		2.4	%		1.9%
Dividend yield		4.8	%		5.6	%		5.4%
Weighted average grant-date fair value	$	3.23		$	2.23		$	1.80

Southern Company’s activity in the stock option program for 2011 is summarized below:


	Shares Subject To Option	Weighted Average Exercise Price

Outstanding at December 31, 2010	50,711,586	$32.48
Granted	7,100,503	38.13
Exercised	(16,800,778)	31.44
Cancelled	(54,489)	33.43

Outstanding at December 31, 2011	40,956,822	$33.88

Exercisable at December 31, 2011	26,539,300	$33.54

The number of stock options vested, and expected to vest in the future, as of December 31, 2011 was not significantly different from the number of stock options outstanding at December 31, 2011 as stated above. As of December 31, 2011, the weighted average remaining contractual term for the options outstanding and options exercisable was approximately six years and five years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $508 million and $338 million, respectively.

As of December 31, 2011, there was $7 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 11 months.

For the years ended December 31, 2011, 2010, and 2009, total compensation cost for stock option awards recognized in income was $22 million, $22 million, and $23 million, respectively, with the related tax benefit also recognized in income of $8 million, $9 million, and $9 million, respectively.

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 was $155 million, $57 million, and $9 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $60 million, $22 million, and $4 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Southern Company has a policy of issuing shares to satisfy share option exercises. Cash received from issuances related to option exercises under the share-based payment arrangements for the years ended December 31, 2011, 2010, and 2009 was $528 million, $198 million, and $19 million, respectively.

Performance Shares

Southern Company provides performance share award units through its Omnibus Incentive Compensation Plan to a large segment of Southern Company system employees ranging from line management to executives. The performance share units granted under the plan vest at the end of a three-year performance period which equates to the requisite service period. Employees that retire prior to the end of the three-year period receive a pro rata number of shares, issued at the end of the performance period, based on actual months of service prior to retirement. The value of the award units is based on Southern Company’s total shareholder return (TSR) over the three-year performance period which measures Southern Company’s relative performance against a group of industry peers. The performance shares are delivered in common stock following the end of the performance period based on Southern Company’s actual TSR and may range from 0% to 200% of the original target performance share amount.

The fair value of performance share awards is determined as of the grant date using a Monte Carlo simulation model to estimate the TSR of Southern Company’s stock among the industry peers over the performance period. Southern Company recognizes compensation expense on a straight-line basis over the three-year performance period without remeasurement. Compensation expense for awards where the service condition is met is recognized regardless of the actual number of shares issued. Expected volatility used in the model for 2011 and 2010 was 19.2% and 20.7%, respectively. The expected volatility is based on the historical volatility of Southern Company’s stock over a period equal to the performance period. The risk-free rate of 1.4% for 2011 and 1.4% for 2010 was based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the award units. The annualized dividend rate at the time of grant was $1.82 and $1.75 for 2011 and 2010, respectively. The weighted-average grant date fair value for units granted during 2010 was $30.13. Total unvested performance share units outstanding as of December 31, 2010 was 908,341. During 2011, 894,858 performance share units were granted with a weighted-average grant date fair value of $35.97. During 2011, 83,601 performance share units were forfeited resulting in 1,719,598 unvested units outstanding at December 31, 2011.

For the years ended December 31, 2011 and 2010, total compensation cost for performance share units recognized in income was $18 million and $9 million, respectively, with the related tax benefit also recognized in income of $7 million and $4 million, respectively. As of December 31, 2011, there was $29 million of total unrecognized compensation cost related to performance share award units that will be recognized over a weighted-average period of approximately 11 months.

Diluted Earnings Per Share

For Southern Company, the only difference in computing basic and diluted earnings per share is attributable to awards outstanding under the stock option and performance share plans. The effect of both stock options and performance share award units were determined using the treasury stock method. Shares used to compute diluted earnings per share were as follows:


	Average Common Stock Shares
	2011		2010		2009

	(in millions)
As reported shares		857		832		795
Effect of options		7		5		1

Diluted shares		864		837		796

Stock options that were not included in the diluted earnings per share calculation because they were anti-dilutive were 0.4 million and 13.1 million at December 31, 2011 and 2010, respectively. Assuming an average stock price of $42.67 (the highest exercise price of the anti-dilutive options outstanding in 2011), the effect of options would have been immaterial for the year ended December 31, 2011. Assuming an average stock price of $38.01 (the highest exercise price of the anti-dilutive options outstanding in 2010), the effect of options would have increased by 0.8 million shares for the year ended December 31, 2010.

Common Stock Dividend Restrictions

The income of Southern Company is derived primarily from equity in earnings of its subsidiaries. At December 31, 2011, consolidated retained earnings included $6.0 billion of undistributed retained earnings of the subsidiaries.

COMMON STOCK

8. STOCK COMPENSATION

Stock Options

Southern Company provides non-qualified stock options through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. As of December 31, 2011, there were 1,242 current and former employees of the Company participating in the stock option program and there were 47 million shares of Southern Company common stock remaining available for awards under the Omnibus Incentive Compensation Plan. The prices of options were at the fair market value of the shares on the dates of grant. These options become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement, the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the Omnibus Incentive Compensation Plan. For certain stock option awards, a change in control will provide accelerated vesting.

The estimated fair values of stock options granted were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term. Southern Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options.

The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:


Year Ended December 31	2011			2010			2009

Expected volatility		17.5	%		17.4	%		15.6%
Expected term (in years)		5.0			5.0			5.0
Interest rate		2.3	%		2.4	%		1.9%
Dividend yield		4.8	%		5.6	%		5.4%
Weighted average grant-date fair value		$3.23		$	2.23			$1.80

The Company’s activity in the stock option program for 2011 is summarized below:


	Shares Subject to Option	Weighted Average Exercise Price

Outstanding at December 31, 2010	8,744,984	$32.35
Granted	1,073,781	38.02
Exercised	(2,622,513)	31.15
Cancelled	(4,466)	35.95

Outstanding at December 31, 2011	7,191,786	$33.63

Exercisable at December 31, 2011	4,724,956	$33.36

The number of stock options vested, and expected to vest in the future, as of December 31, 2011 was not significantly different from the number of stock options outstanding at December 31, 2011 as stated above. As of December 31, 2011, the weighted average remaining contractual term for the options outstanding and options exercisable was approximately six years and five years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $91 million and $61 million, respectively.

As of December 31, 2011, there was $1 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 10 months.

For the years ended December 31, 2011, 2010, and 2009, total compensation cost for stock option awards recognized in income was $3 million, $3 million, and $4 million, respectively, with the related tax benefit also recognized in income of $1 million, $1 million, and $1 million, respectively.

The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company.

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 was $23 million, $12 million, and $2 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $9 million, $4 million, and $1 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Performance Shares

Southern Company provides performance share award units through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. The performance share units granted under the plan vest at the end of a three-year performance period which equates to the requisite service period. Employees that retire prior to the end of the three-year period receive a pro rata number of shares, issued at the end of the performance period, based on actual months of service prior to retirement. The value of the award units is based on Southern Company’s total shareholder return (TSR) over the three-year performance period which measures Southern Company’s relative performance against a group of industry peers. The performance shares are delivered in common stock following the end of the performance period based on Southern Company’s actual TSR and may range from 0% to 200% of the original target performance share amount.

The fair value of performance share awards is determined as of the grant date using a Monte Carlo simulation model to estimate the TSR of Southern Company’s stock among the industry peers over the performance period. The Company recognizes compensation expense on a straight-line basis over the three-year performance period without remeasurement. Compensation expense for awards where the service condition is met is recognized regardless of the actual number of shares issued. Expected volatility used in the model for 2011 and 2010 was 19.2% and 20.7%, respectively. The expected volatility is based on the historical volatility of Southern Company’s stock over a period equal to the performance period. The risk-free rate of 1.4% for 2011 and 1.4% for 2010 was based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the award units. The annualized dividend rate at the time of grant was $1.82 and $1.75 for 2011 and 2010, respectively. The weighted-average grant date fair value for units granted during 2010 was $30.13. Total unvested performance share units outstanding as of December 31, 2010 was 151,802. During 2011, 142,822 performance share units were granted with a weighted-average grant date fair value of $35.97. During 2011, 6,904 performance share units were forfeited resulting in 287,720 unvested units outstanding at December 31, 2011.

For the years ended December 31, 2011 and 2010, total compensation cost for performance share units recognized in income was $3 million and $1 million, respectively, with the related tax benefit also recognized in income of $1 million and $1 million, respectively. As of December 31, 2011, there was $5 million of total unrecognized compensation cost related to performance share award units that will be recognized over a weighted-average period of approximately 11 months.

COMMON STOCK

8. STOCK COMPENSATION

Stock Options

Southern Company provides non-qualified stock options through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. As of December 31, 2011, there were 1,722 current and former employees of the Company participating in the stock option program, and there were 47 million shares of Southern Company common stock remaining available for awards under the Omnibus Incentive Compensation Plan. The prices of options were at the fair market value of the shares on the dates of grant. These options become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the Omnibus Incentive Compensation Plan. For certain stock option awards, a change in control will provide accelerated vesting.

The estimated fair values of stock options granted were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term. Southern Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options.

The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:


Year Ended December 31	2011				2010				2009
Expected volatility			17.5	%			17.4	%			15.6	%
Expected term (in years)			5.0				5.0				5.0
Interest rate			2.3	%			2.4	%			1.9	%
Dividend yield			4.8	%			5.6	%			5.4	%
Weighted average grant-date fair value		$	3.23			$	2.23			$	1.80

The Company’s activity in the stock option program for 2011 is summarized below:


	Shares Subject to Option			Weighted Average Exercise Price

Outstanding at December 31, 2010		10,381,933			$	32.44
Granted		1,264,485				37.99
Exercised		(3,686,300	)			31.56
Cancelled		(7,531	)			32.19

Outstanding at December 31, 2011		7,952,587			$	33.73

Exercisable at December 31, 2011		5,245,143			$	33.42

The number of stock options vested, and expected to vest in the future, as of December 31, 2011 was not significantly different from the number of stock options outstanding at December 31, 2011 as stated above. As of December 31, 2011, the weighted average remaining contractual term for the options outstanding and options exercisable was approximately six years and five years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $100 million and $68 million, respectively.

As of December 31, 2011, the amount of unrecognized compensation cost related to stock option awards not yet vested was immaterial.

The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company. The amounts were not material for any year presented.

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 was $32 million, $12 million, and $2 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises was not material for any of the years presented.

Performance Shares

Southern Company provides performance share award units through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. The performance share units granted under the plan vest at the end of a three-year performance period which equates to the requisite service period. Employees that retire prior to the end of the three-year period receive a pro rata number of shares, issued at the end of the performance period, based on actual months of service prior to retirement. The value of the award units is based on Southern Company’s total shareholder return (TSR) over the three-year performance period which measures Southern Company’s relative performance against a group of industry peers. The performance shares are delivered in common stock following the end of the performance period based on Southern Company’s actual TSR and may range from 0% to 200% of the original target performance share amount.

The fair value of performance share awards is determined as of the grant date using a Monte Carlo simulation model to estimate the TSR of Southern Company’s stock among the industry peers over the performance period. The Company recognizes compensation expense on a straight-line basis over the three-year performance period without remeasurement. Compensation expense for awards where the service condition is met is recognized regardless of the actual number of shares issued. Expected volatility used in the model for 2011 and 2010 was 19.2% and 20.7%, respectively. The expected volatility is based on the historical volatility of Southern Company’s stock over a period equal to the performance period. The risk-free rate of 1.4% for 2011 and 1.4% for 2010 was based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the award units. The annualized dividend rate at the time of grant was $1.82 and $1.75 for 2011 and 2010, respectively. The weighted-average grant date fair value for units granted during 2010 was $30.13. Total unvested performance share units outstanding as of December 31, 2010 was 185,512. During 2011, 168,748 performance share units were granted with a weighted-average grant date fair value of $35.97. During 2011, 28,302 performance share units were forfeited resulting in 325,958 unvested units outstanding at December 31, 2011.

For the years ended December 31, 2011 and 2010, total compensation cost for performance share units and the related tax benefit recognized in income were not material. As of December 31, 2011, the amount of total unrecognized compensation cost related to performance share award units that will be recognized over a weighted-average period of approximately 11 months was not material.

COMMON STOCK

8. STOCK COMPENSATION

Stock Options

Southern Company provides non-qualified stock options through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. As of December 31, 2011, there were 276 current and former employees of the Company participating in the stock option program, and there were 47 million shares of Southern Company common stock remaining available for awards under the Omnibus Incentive Compensation Plan. The prices of options were at the fair market value of the shares on the dates of grant. These options become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement, the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the Omnibus Incentive Compensation Plan. For certain stock option awards, a change in control will provide accelerated vesting.

The estimated fair values of stock options granted were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term.

Southern Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options.

The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:


Year Ended December 31	2011		2010		2009

Expected volatility		17.5%		17.4%		15.6%
Expected term (in years)		5.0		5.0		5.0
Interest rate		2.3%		2.4%		1.9%
Dividend yield		4.8%		5.6%		5.4%
Weighted average grant-date fair value		$3.23		$2.23		$1.80

The Company’s activity in the stock option program for 2011 is summarized below:


	Shares Subject to Option		Weighted Average Exercise Price

Outstanding at December 31, 2010		1,735,965		$32.47
Granted		242,530		38.08
Exercised		(479,832)		31.33
Cancelled		—		—

Outstanding at December 31, 2011		1,498,663		$33.75

Exercisable at December 31, 2011		906,637		$33.55

The number of stock options vested, and expected to vest in the future, as of December 31, 2011 was not significantly different from the number of stock options outstanding at December 31, 2011 as stated above. As of December 31, 2011, the weighted average remaining contractual term for the options outstanding and options exercisable was approximately six years and five years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $18.8 million and $11.6 million, respectively.

As of December 31, 2011, there was $0.4 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 11 months.

For the years ended December 31, 2011, 2010, and 2009, total compensation cost for stock option awards recognized in income was $0.7 million, $0.8 million, and $0.9 million, respectively, with the related tax benefit also recognized in income of $0.3 million, $0.3 million, and $0.4 million, respectively.

The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company.

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 was $3.2 million, $1.6 million, and $0.2 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $1.2 million, $0.6 million, and $0.1 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Performance Shares

Southern Company provides performance share award units through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. The performance share units granted under the plan vest at the end of a three-year performance period which equates to the requisite service period. Employees that retire prior to the end of the three-year period receive a pro rata number of shares, issued at the end of the performance period, based on actual months of service prior to retirement. The value of the award units is based on Southern Company’s total shareholder return (TSR) over the three-year performance period which measures Southern Company’s relative performance against a group of industry peers. The performance shares are delivered in common stock following the end of the performance period based on Southern Company’s actual TSR and may range from 0% to 200% of the original target performance share amount.

The fair value of performance share awards is determined as of the grant date using a Monte Carlo simulation model to estimate the TSR of Southern Company’s stock among the industry peers over the performance period. The Company recognizes compensation expense on a straight-line basis over the three-year performance period without remeasurement. Compensation expense for awards where the service condition is met is recognized regardless of the actual number of shares issued. Expected volatility used in the model for 2011 and 2010 was 19.2% and 20.7%, respectively. The expected volatility is based on the historical volatility of Southern Company’s stock over a period equal to the performance period. The risk-free rate of 1.4% for 2011 and 1.4% for 2010 was based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the award units. The annualized dividend rate at the time of grant was $1.82 and $1.75 for 2011 and 2010, respectively. The weighted-average grant date fair value for units granted during 2010 was $30.13. Total unvested performance share units outstanding as of December 31, 2010 was 35,568. During 2011, 31,457 performance share units were granted with a weighted-average grant date fair value of $35.97. During 2011, 363 performance share units were forfeited resulting in 66,662 unvested units outstanding at December 31, 2011.

For the years ended December 31, 2011 and 2010, total compensation cost for performance share units and the related tax benefit recognized in income were not material. As of December 31, 2011, the amount of total unrecognized compensation cost related to performance share award units that will be recognized over a weighted-average period of approximately 11 months was not material.

COMMON STOCK

8. STOCK COMPENSATION

Stock Options

Southern Company provides non-qualified stock options through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. As of December 31, 2011, there were 271 current and former employees of the Company participating in the stock option program and there were 47 million shares of Southern Company common stock remaining available for awards under the Omnibus Incentive Compensation Plan. The prices of options were at the fair market value of the shares on the dates of grant. These options become exercisable pro rata over a maximum period of three years from the date of grant. The Company generally recognizes stock option expense on a straight-line basis over the vesting period which equates to the requisite service period; however, for employees who are eligible for retirement, the total cost is expensed at the grant date. Options outstanding will expire no later than 10 years after the date of grant, unless terminated earlier by the Southern Company Board of Directors in accordance with the Omnibus Incentive Compensation Plan. For certain stock option awards, a change in control will provide accelerated vesting.

The estimated fair values of stock options granted were derived using the Black-Scholes stock option pricing model. Expected volatility was based on historical volatility of Southern Company’s stock over a period equal to the expected term. Southern Company used historical exercise data to estimate the expected term that represents the period of time that options granted to employees are expected to be outstanding. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant that covers the expected term of the stock options.

The following table shows the assumptions used in the pricing model and the weighted average grant-date fair value of stock options granted:


Year Ended December 31	2011			2010			2009
Expected volatility		17.5	%		17.4	%		15.6	%
Expected term (in years)		5.0			5.0			5.0
Interest rate		2.3	%		2.4	%		1.9	%
Dividend yield		4.8	%		5.6	%		5.4	%
Weighted average grant-date fair value	$	3.23		$	2.23		$	1.80

The Company’s activity in the stock option program for 2011 is summarized below:


	Shares Subject to Option			Weighted Average Exercise Price
Outstanding at December 31, 2010		1,843,370			$32.30
Granted		261,718			37.99
Exercised		(535,018	)		31.31
Cancelled		(342	)		32.33
Outstanding at December 31, 2011		1,569,728			$33.59

Exercisable at December 31, 2011		967,865			$33.22

The number of stock options vested, and expected to vest in the future, as of December 31, 2011 was not significantly different from the number of stock options outstanding at December 31, 2011 as stated above. As of December 31, 2011, the weighted average remaining contractual term for the options outstanding and options exercisable was approximately six years and five years, respectively, and the aggregate intrinsic value for the options outstanding and options exercisable was $19.9 million and $12.6 million, respectively.

As of December 31, 2011, there was $0.2 million of total unrecognized compensation cost related to stock option awards not yet vested. That cost is expected to be recognized over a weighted-average period of approximately 11 months.

For the years ended December 31, 2011, 2010, and 2009, total compensation cost for stock option awards recognized in income was $0.8 million, $0.8 million, and $0.9 million, respectively, with the related tax benefit also recognized in income of $0.3 million, $0.3 million, and $0.3 million, respectively.

The compensation cost and tax benefits related to the grant and exercise of Southern Company stock options to the Company’s employees are recognized in the Company’s financial statements with a corresponding credit to equity, representing a capital contribution from Southern Company.

The total intrinsic value of options exercised during the years ended December 31, 2011, 2010, and 2009 was $4.2 million, $2.7 million, and $0.4 million, respectively. The actual tax benefit realized by the Company for the tax deductions from stock option exercises totaled $1.6 million, $1.0 million, and $0.2 million for the years ended December 31, 2011, 2010, and 2009, respectively.

Performance Shares

Southern Company provides performance share award units through its Omnibus Incentive Compensation Plan to a large segment of the Company’s employees ranging from line management to executives. The performance share units granted under the plan vest at the end of a three-year performance period which equates to the requisite service period. Employees that retire prior to the end of the three-year period receive a pro rata number of shares, issued at the end of the performance period, based on actual months of service prior to retirement. The value of the award units is based on Southern Company’s total shareholder return (TSR) over the three-year performance period which measures Southern Company’s relative performance against a group of industry peers. The performance shares are delivered in common stock following the end of the performance period based on Southern Company’s actual TSR and may range from 0% to 200% of the original target performance share amount.

The fair value of performance share awards is determined as of the grant date using a Monte Carlo simulation model to estimate the TSR of Southern Company’s stock among the industry peers over the performance period. The Company recognizes compensation expense on a straight-line basis over the three-year performance period without remeasurement. Compensation expense for awards where the service condition is met is recognized regardless of the actual number of shares issued. Expected volatility used in the model for 2011 and 2010 was 19.2% and 20.7%, respectively. The expected volatility is based on the historical volatility of Southern Company’s stock over a period equal to the performance period. The risk-free rate of 1.4% for 2011 and 1.4% for 2010 was based on the U.S. Treasury yield curve in effect at the time of grant that covers the performance period of the award units. The annualized dividend rate at the time of grant was $1.82 and $1.75 for 2011 and 2010, respectively. The weighted-average grant date fair value for units granted during 2010 was $30.13. Total unvested performance share units outstanding as of December 31, 2010 was 36,981. During 2011, 35,067 performance share units were granted with a weighted-average grant date fair value of $35.97. During 2011, 1,218 performance share units were forfeited resulting in 70,830 unvested units outstanding at December 31, 2011.

For the years ended December 31, 2011 and 2010, total compensation cost for performance share units recognized in income was $0.7 million and $0.3 million, respectively, with the related tax benefit also recognized in income of $0.3 million and $0.1 million, respectively. As of December 31, 2011, there was $1.2 million of total unrecognized compensation cost related to performance share award units that will be recognized over a weighted-average period of approximately 11 months.