STOCK-BASED COMPENSATION PLANS

12 Months Ended

Dec. 31, 2014

STOCK-BASED COMPENSATION PLANS

STOCK-BASED COMPENSATION PLANS

12 STOCK-BASED COMPENSATION PLANS

        The Company has one stockholder-approved stock-based compensation plan.

Equity Incentive Plan

        The Company's equity incentive plan was approved by stockholders on April 27, 2005 and May 20, 2014. The Company is authorized to issue awards up to 2,000,000 shares of common stock.

        During 2014 and 2013, the Company granted annual Restricted Stock Awards (RSAs) of 60,467 and 74,824 shares, respectively, of common stock to officers and directors of the Company. In 2014 10,544 RSA shares were cancelled and no RSA shares were cancelled in 2013. Employee RSAs granted have a one-year cliff vesting. RSAs granted in 2014 vest over 36 months and RSAs granted in 2013 vest over 48 months. Director RSAs generally vest at the end of 12 months. During 2014 and 2013, the shares granted were valued at $23.62 and $20.66 per share, respectively, based upon the fair market value of the Company's common stock on the date of grant.

        The Company granted performance-based Restricted Stock Unit Awards (RSUs) of 39,232 shares and 50,267 shares of common stock to officers in 2014 and 2013, respectively. Each award reflects a target number of shares that may be issued to the award recipient. The awards may be earned upon the completion of a three-year performance period ending on December 31, 2015 for the 2013 RSUs and December 31, 2016 for the 2014 RSUs. Whether RSUs are earned at the end of the performance period will be determined based on the achievement of certain performance objectives set by the Board of Director Compensation Committee in connection with the issuance of the RSUs. The performance objectives are based on the Company's business plan covering the performance period. The performance objectives include achieving the budgeted return on equity, budgeted investment in utility plant, customer service standards, employee safety standards and water quality standards. Depending on the results achieved during the three-year performance period, the actual number of shares that a grant recipient receives at the end of the performance period may range from 0% to 200% of the target shares granted, provided that the grantee is continuously employed by the Company through the vesting date. If prior to the vesting date employment is terminated by reason of death, disability or normal retirement, then a pro rata portion of this award will vest. RSUs are not included in diluted shares for financial reporting until earned. The RSUs are recognized as expense ratably over the three year performance period using a fair market value of $23.61 per share for the 2014 RSUs and $20.62 per share for the 2013 RSUs and an estimate of RSUs earned during the performance period.

        The Company has recorded compensation costs for the RSAs and RSUs which are included in administrative and general operating expenses in the amount of $2.2 million and $1.8 million for 2014 and 2013, respectively.