STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

Stock-Based Compensation

The following table reflects the stock-based compensation expense and the related deferred tax benefit recognized in income for the years ended December 31:

(Millions)	2013		2012		2011
Stock options	$	0.7	$	0.7	$	0.7
Performance stock rights	1.1		1.9		1.3
Restricted shares and restricted share units	3.4		3.4		2.3
Total stock-based compensation expense	$	5.2	$	6.0	$	4.3
Deferred income tax benefit	$	2.1	$	2.4	$	1.7

No stock-based compensation cost was capitalized during 2013, 2012, and 2011.

Stock Options

The following table shows the weighted-average fair values per stock option granted along with the assumptions incorporated into the binomial lattice valuation models:

	2013 Grant	2012 Grant	2011 Grant
Weighted-average fair value per option	$6.03	$6.30	$6.57
Expected term	5 years	5 years	5 years
Risk-free interest rate	0.18% – 2.11%	0.17% – 2.18%	0.27% – 3.90%
Expected dividend yield	5.33%	5.28%	5.34%
Expected volatility	24%	25%	25%

A summary of stock option activity for 2013, and information related to outstanding and exercisable stock options at December 31, 2013, is presented below:

	Stock Options		Weighted-Average  Exercise Price Per  Share		Weighted-Average  Remaining Contractual Life (in Years)	Aggregate  Intrinsic Value (Millions)
Outstanding at December 31, 2012	66,852		$	49.95
Granted	19,364		56.00
Exercised	(34,473	)	49.15
Expired	(1,750	)	44.73
Outstanding at December 31, 2013	49,993		$	53.03	7.4	$	0.1
Exercisable at December 31, 2013	12,541		$	52.97	4.5	$	—

The aggregate intrinsic value for outstanding and exercisable options in the above table represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options on December 31, 2013. This is calculated as the difference between Integrys Energy Group’s closing stock price on December 31, 2013, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during 2013, 2012, and 2011 was not significant.

As of December 31, 2013, future compensation cost expected to be recognized for unvested and outstanding stock options was not significant.

Performance Stock Rights

The table below reflects the assumptions used in the Monte Carlo valuation models to estimate the fair value of the outstanding performance stock rights at December 31:

	2013	2012	2011
Risk-free interest rate	0.13% – 1.27%	0.17% – 1.27%	0.00% – 1.27%
Expected dividend yield	5.28% – 5.34%	5.18% – 5.34%	5.28% – 5.34%
Expected volatility	15% – 36%	14% – 36%	21% – 36%

A summary of the 2013 activity related to performance stock rights accounted for as equity awards is presented below:

	Performance Stock Rights		Weighted-Average Fair Value *
Outstanding at December 31, 2012	4,908		$	66.95
Granted	1,374		48.50
Award modifications	2,601		39.80
Distributed	(4,318	)	74.53
Adjustment for final payout	996		74.53
Outstanding at December 31, 2013	5,561		$	45.16

* Reflects the weighted-average fair value used to measure equity awards. Equity awards are measured using the grant date fair value or the fair value on the modification date.

The weighted-average grant date fair value of performance stock rights awarded during 2013, 2012, and 2011 was $48.50, $52.70, and $49.21 per performance stock right, respectively.

A summary of the 2013 activity related to performance stock rights accounted for as liability awards is presented below:

	Performance Stock Rights
Outstanding at December 31, 2012	6,774
Granted	5,489
Award modifications	(2,601	)
Distributed	(573	)
Adjustment for final payout	133
Outstanding at December 31, 2013	9,222

The weighted-average fair value of all outstanding performance stock rights accounted for as liability awards as of December 31, 2013, was $30.17 per performance stock right.

As of December 31, 2013, future compensation cost expected to be recognized for unvested and outstanding performance stock rights (equity and liability awards) was not significant.

The total intrinsic value of performance stock rights distributed during 2013, 2012, and 2011 was not significant.

Restricted Shares and Restricted Share Units

A summary of the 2013 activity related to all restricted share unit awards (equity and liability awards) is presented below:

	Restricted Share Unit Awards		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2012	67,954		$	48.26
Granted	23,055		56.05
Dividend equivalents	3,133		52.03
Vested and released	(28,079	)	46.20
Transfers	1,678		52.86
Outstanding at December 31, 2013	67,741		$	52.06

As of December 31, 2013, $1.2 million of compensation cost related to these awards was expected to be recognized over a weighted-average period of 2.2 years.

The total intrinsic value of restricted share and restricted share unit awards vested and released during 2013, 2012, and 2011 was $1.6 million, $1.5 million, and $1.0 million, respectively. The actual tax benefit realized for the tax deductions from the vesting and release of restricted shares and restricted share units during 2013, 2012, and 2011 was not significant.

The weighted-average grant date fair value of restricted share units awarded during 2013, 2012, and 2011 was $56.05, $53.24, and $49.40 per unit, respectively.