
	Stock-Based Compensation

In 2008, the Company adopted, and its shareowners approved, the 2008 Stock Incentive Plan. Under the 2008 Stock Incentive Plan, restricted stock, stock options, stock appreciation rights and performance units may be granted to officers, directors and other key employees of the Company and its subsidiaries. The Company has authorized the issuance of up to 2,750,000 shares under the 2008 Stock Incentive Plan.

The following table summarizes the Company's pre-tax compensation expense and related income tax benefit for the years ended December 31, 2012, 2011 and 2010 related to the Company's performance units and restricted stock.



Year ended December 31 (In millions)	2012		2011		2010
Performance units
Total shareholder return	$	8.0	$	8.2	$	6.8
Earnings per share	4.2		5.5		2.5
Total performance units	12.2		13.7		9.3
Restricted stock	0.6		1.0		0.9
Total compensation expense	$	12.8	$	14.7	$	10.2
Income tax benefit	$	4.9	$	5.7	$	3.9

The Company has issued new shares to satisfy stock option exercises, restricted stock grants and payouts of earned performance units. In 2012, 2011 and 2010, there were 424,555 shares, 311,623 shares and 255,389 shares, respectively, of new common stock issued pursuant to the Company's stock incentive plans related to exercised stock options, restricted stock grants (net of forfeitures) and payouts of earned performance units. In 2012, there were 5,911 shares of restricted stock returned to the Company to satisfy tax liabilities.

In November 2012, the Company purchased 60,000 shares of its common stock at an average cost of $55.41 per share on the open market. These shares will be used to satisfy Enogex's portion of the Company's obligation to deliver shares of common stock related to long-term incentive payouts of earned performance units in 2013. The Company expects to purchase shares in the future to satisfy a portion of its obligation under its incentive plan. The Company records treasury stock purchases at cost. Treasury stock is presented as a reduction of stockholders' equity in the Company's Consolidated Balance Sheet.

Performance Units

Under the 2008 Stock Incentive Plan, the Company has issued performance units which represent the value of one share of the Company's common stock. The performance units provide for accelerated vesting if there is a change in control (as defined in the 2008 Stock Incentive Plan). Each performance unit is subject to forfeiture if the recipient terminates employment with the Company or a subsidiary prior to the end of the three-year award cycle for any reason other than death, disability or retirement. In the event of death, disability or retirement, a participant will receive a prorated payment based on such participant's number of full months of service during the award cycle, further adjusted based on the achievement of the performance goals during the award cycle.

The performance units granted based on total shareholder return are contingently awarded and will be payable in shares of the Company's common stock subject to the condition that the number of performance units, if any, earned by the employees upon the expiration of a three-year award cycle (i.e., three-year cliff vesting period) is dependent on the Company's total shareholder return ranking relative to a peer group of companies. The performance units granted based on earnings per share are contingently awarded and will be payable in shares of the Company's common stock based on the Company's earnings per share growth over a three-year award cycle (i.e., three-year cliff vesting period) compared to a target set at the time of the grant by the Compensation Committee of the Company's Board of Directors. All of these performance units are classified as equity in the Consolidated Balance Sheet. If there is no or only a partial payout for the performance units at the end of the award cycle, the unearned performance units are cancelled. Payout requires approval of the Compensation Committee of the Company's Board of Directors. Payouts, if any, are all made in common stock and are considered made when the payout is approved by the Compensation Committee.

Performance Units – Total Shareholder Return

The fair value of the performance units based on total shareholder return was estimated on the grant date using a lattice-based valuation model that factors in information, including the expected dividend yield, expected price volatility, risk-free interest rate and the probable outcome of the market condition, over the expected life of the performance units. Compensation expense for the performance units is a fixed amount determined at the grant date fair value and is recognized over the three-year award cycle regardless of whether performance units are awarded at the end of the award cycle. Dividends are not accrued or paid during the performance period and, therefore, are not included in the fair value calculation. Expected price volatility is based on the historical volatility of the Company's common stock for the past three years and was simulated using the Geometric Brownian Motion process. The risk-free interest rate for the performance unit grants is based on the three-year U.S. Treasury yield curve in effect at the time of the grant. The expected life of the units is based on the non-vested period since inception of the award cycle. There are no post-vesting restrictions related to the Company's performance units based on total shareholder return. The number of performance units granted based on total shareholder return and the assumptions used to calculate the grant date fair value of the performance units based on total shareholder return are shown in the following table.



	2012			2011			2010
Number of units granted	169,339			213,721			214,750
Fair value of units granted	$	51.82		$	46.09		$	39.43
Expected dividend yield	3.0		%	3.2		%	3.9		%
Expected price volatility	22.0		%	33.0		%	34.0		%
Risk-free interest rate	0.38		%	1.40		%	1.42		%
Expected life of units (in years)	2.87			2.87			2.87

Performance Units – Earnings Per Share

The fair value of the performance units based on earnings per share is based on grant date fair value which is equivalent to the price of one share of the Company's common stock on the date of grant. The fair value of performance units based on earnings per share varies as the number of performance units that will vest is based on the grant date fair value of the units and the probable outcome of the performance condition. The Company reassesses at each reporting date whether achievement of the performance condition is probable and accrues compensation expense if and when achievement of the performance condition is probable. As a result, the compensation expense recognized for these performance units can vary from period to period. There are no post-vesting restrictions related to the Company's performance units based on earnings per share. The number of performance units granted based on earnings per share and the grant date fair value are shown in the following table.



	2012		2011		2010
Number of units granted	40,797		71,238		71,585
Fair value of units granted	$	47.63	$	41.61	$	32.44

In 2012, the performance unit grant for Enogex employees that was previously based on earnings per share was changed to a cash payment that entitles Enogex employees to receive from 0 percent to 200 percent of the performance units granted based on the growth in Enogex's EBITDA over a three-year award cycle (i.e., three-year cliff vesting period) compared to a growth target set by the Compensation Committee of the Company's Board of Directors.

Restricted Stock

Under the 2008 Stock Incentive Plan and beginning in 2008, the Company issued restricted stock to certain existing non-officer employees as well as other executives upon hire to attract and retain individuals to be competitive in the marketplace. The restricted stock vests in one-third annual increments. Prior to vesting, each share of restricted stock is subject to forfeiture if the recipient ceases to render substantial services to the Company or a subsidiary for any reason other than death, disability or retirement. These shares may not be sold, assigned, transferred or pledged and are subject to a risk of forfeiture.

The fair value of the restricted stock was based on the closing market price of the Company's common stock on the grant date. Compensation expense for the restricted stock is a fixed amount determined at the grant date fair value and is recognized as services are rendered by employees over a three-year vesting period. Also, the Company treats its restricted stock as multiple separate awards by recording compensation expense separately for each tranche whereby a substantial portion of the expense is recognized in the earlier years in the requisite service period. Dividends are accrued and paid during the vesting period and, therefore, are included in the fair value calculation. The expected life of the restricted stock is based on the non-vested period since inception of the three-year award cycle. There are no post-vesting restrictions related to the Company's restricted stock. The number of shares of restricted stock granted and the grant date fair value are shown in the following table.



	2012		2011		2010
Shares of restricted stock granted	5,412		17,902		26,653
Fair value of restricted stock granted	$	53.44	$	48.82	$	40.78

A summary of the activity for the Company's performance units and restricted stock at December 31, 2012 and changes in 2012 are shown in the following table.



	Performance Units
	Total Shareholder Return				Earnings Per Share				Restricted Stock
(dollars in millions)	Number of Units		Aggregate Intrinsic Value		Number of Units		Aggregate Intrinsic Value		Number of Shares		Aggregate Intrinsic Value
Units/Shares Outstanding at 12/31/11	706,124				235,376				37,244
Granted (A)	169,339				40,797				5,412
Converted (B)	(291,294	)	$	30.6	(97,099	)	$	10.2	N/A
Vested	N/A				N/A				(15,847	)	$	0.9
Forfeited	(49,605	)			(15,155	)			(2,256	)
Units/Shares Outstanding at 12/31/12	534,564		$	46.3	163,919		$	13.8	24,553		$	1.4
Units/Shares Fully Vested at 12/31/12	188,633		$	21.2	62,880		$	7.1


(A)	For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is dependent upon performance and may range from 0 percent to 200 percent of the target.


(B)	These amounts represent performance units that vested at December 31, 2011 which were settled in February 2012.

A summary of the activity for the Company's non-vested performance units and restricted stock at December 31, 2012 and changes in 2012 are shown in the following table.



	Performance Units
	Total Shareholder Return					Earnings Per Share					Restricted Stock
	Number of Units			Weighted-Average Grant Date Fair Value		Number of Units			Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
Units/Shares Non-Vested at 12/31/11	414,830			$	42.75	138,277			$	37.01	37,244		$	44.24
Granted	169,339		(A)	$	51.82	40,797		(A)	$	47.63	5,412		$	53.44
Vested	(188,633	)		$	39.43	(62,880	)		$	32.44	(15,847	)	$	42.78
Forfeited	(49,605	)		$	44.24	(15,155	)		$	38.02	(2,256	)	$	44.22
Units/Shares Non-Vested at 12/31/12	345,931			$	48.79	101,039			$	44.00	24,553		$	47.21
Units/Shares Expected to Vest	323,303					94,557					24,553


(A)	For performance units, this represents the target number of performance units granted. Actual number of performance units earned, if any, is dependent upon performance and may range from 0 percent to 200 percent of the target.

Fair Value of Vested Performance Units and Restricted Stock

A summary of the Company's fair value for its vested performance units and restricted stock is shown in the following table.



Year ended December 31 (In millions)	2012		2011		2010
Performance units
Total shareholder return	$	7.4	$	7.4	$	5.4
Earnings per share	4.1		3.9		1.9
Restricted stock	0.7		1.0		0.6

Unrecognized Compensation Cost

A summary of the Company's unrecognized compensation cost for its non-vested performance units and restricted stock and the weighted-average periods over which the compensation cost is expected to be recognized are shown in the following table.



December 31, 2012	Unrecognized Compensation Cost (in millions)		Weighted Average to be Recognized (in years)
Performance units
Total shareholder return	$	7.7	1.64
Earnings per share	3.9		1.14
Total performance units	11.6
Restricted stock	0.5		1.96
Total	$	12.1

Stock Options

The Company last issued stock options in 2004 and as of December 31, 2006, all stock options were fully vested and expensed. All stock options have a contractual life of 10 years. A summary of the activity for the Company's stock options at December 31, 2012 and changes during 2012 are shown in the following table.



(dollars in millions)	Number of Options		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Term
Options Outstanding at 12/31/11	55,800		$	23.19
Exercised	(36,200	)	$	23.41	$	2.0
Options Outstanding at 12/31/12	19,600		$	22.80	$	0.6	0.95	years
Options Fully Vested and Exercisable at 12/31/12	19,600		$	22.80	$	0.6	0.95	years

A summary of the activity for the Company's exercised stock options in 2012, 2011 and 2010 are shown in the following table.



Year ended December 31 (In millions)	2012		2011		2010
Intrinsic value (A)	$	2.0	$	2.2	$	2.5
Cash received from stock options exercised	0.8		1.3		3.2
Income tax benefit realized for the tax deductions from exercised stock options (B)	—		—		1.0


(A)	The difference between the market value on the date of exercise and the option exercise price.


(B)	The Company did not realize an income tax benefit for the tax deductions from the exercised stock options in 2012 and 2011 due to the Company being in a tax net operating loss position in 2012 and 2011.