Note 8 – Stock-based Compensation

Under the Company’s 2009 Omnibus Equity Compensation Plan, as amended as of February 27, 2014 (the “2009 Plan”), as approved by the Company’s shareholders to replace the 2004 Equity Compensation Plan (the “2004 Plan”), stock options, stock units, stock awards, stock appreciation rights, dividend equivalents, and other stock-based awards may be granted to employees, non-employee directors, and consultants and advisors. The 2009 Plan authorizes 6,250,000 shares for issuance under the plan. A maximum of 3,125,000 shares under the 2009 Plan may be issued pursuant to stock awards, stock units and other stock-based awards, subject to adjustment as provided in the 2009 Plan. During any calendar year, no individual may be granted (i) stock options and stock appreciation rights under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate or (ii) stock awards, stock units or other stock-based awards under the 2009 Plan for more than 500,000 shares of Company stock in the aggregate, subject to adjustment as provided in the 2009 Plan. Awards to employees and consultants under the 2009 Plan are made by a committee of the Board of Directors of the Company, except that with respect to awards to the Chief Executive Officer, the committee recommends those awards for approval by the non-employee directors of the Board of Directors. In the case of awards to non-employee directors, the Board of Directors makes such awards. At September 30, 2016, 3,982,401 shares were still available for issuance under the 2009 Plan. No further grants may be made under the 2004 Plan.

Performance Share Units – A performance share unit (“PSU”) represents the right to receive a share of the Company’s common stock if specified performance goals are met over the three-year performance period specified in the grant, subject to exceptions through the respective vesting period, generally three years. Each grantee is granted a target award of PSUs, and may earn between 0% and 200% of the target amount depending on the Company’s performance against the performance goals. The following table provides compensation costs for stock-based compensation related to PSUs:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock-based compensation within operations and maintenance expenses	$	1,012	$	836	$	2,504	$	3,475
Income tax benefit		411		339		1,013		1,414

The following table summarizes the PSU transactions for the nine months ended September 30, 2016:



	Number	Weighted
	of	Average
	Share Units	Fair Value
Nonvested share units at December 31, 2015	424,858	$	25.78
Granted	152,533		28.89
Performance criteria adjustment	37,551		26.18
Forfeited	(17,661)		26.79
Share units vested in prior period and issued in current period	44,625		26.88
Share units issued	(189,885)		23.25
Nonvested share units at September 30, 2016	452,021	$	27.99

A portion of the fair value of PSUs was estimated at the grant date based on the probability of satisfying the market-based conditions using the Monte Carlo valuation method, which assesses probabilities of various outcomes of market conditions. The other portion of the fair value of the PSUs is based on the fair market value of the Company’s stock at the grant date, regardless of whether the market-based condition is satisfied. The per unit weighted-average fair value at the date of grant for PSUs granted during the nine months ended September 30, 2016 and 2015 was $28.89 and $26.45, respectively. The fair value of each PSU grant is amortized monthly into compensation expense on a straight-line basis over their respective vesting periods, generally 36 months. The accrual of compensation costs is based on our estimate of the final expected value of the award, and is adjusted as required for the portion based on the performance-based condition. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the PSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the PSUs. The recording of compensation expense for PSUs has no impact on net cash flows.

Restricted Stock Units – A restricted stock unit (“RSU”) represents the right to receive a share of the Company’s common stock. RSUs are eligible to be earned at the end of a specified restricted period, generally three years, beginning on the date of grant. The Company assumes that forfeitures will be minimal, and recognizes forfeitures as they occur, which results in a reduction in compensation expense. As the payout of the RSUs includes dividend equivalents, no separate dividend yield assumption is required in calculating the fair value of the RSUs. The following table provides compensation costs for stock-based compensation related to RSUs:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock-based compensation within operations and maintenance expenses	$	299	$	209	$	763	$	888
Income tax benefit		124		86		315		367

The following table summarizes the RSU transactions for the nine months ended September 30, 2016:



	Number	Weighted
	of	Average
	Stock Units	Fair Value
Nonvested stock units at December 31, 2015	88,353	$	24.94
Granted	50,324		32.09
Stock units vested and issued	(24,318)		23.37
Forfeited	(3,952)		27.81
Nonvested stock units at September 30, 2016	110,407	$	28.44

The per unit weighted-average fair value at the date of grant for RSUs granted during the nine months ended September 30, 2016 and 2015 was $32.09 and $25.97, respectively.

Stock Options – The following table provides the income tax benefit for stock-based compensation related to stock options granted in prior periods:



	Three Months Ended				Nine Months Ended
	September 30,					September 30,
	2016		2015		2016		2015
Income tax benefit	$	15	$	28	$	249	$	143

For the nine months ended September 30, 2016 and 2015, there were no compensation costs for stock-based compensation related to stock options, as stock options were fully amortized in 2013. Additionally, there were no stock options granted during the nine months ended September 30, 2016 or 2015.

The following table summarizes stock option transactions for the nine months ended September 30, 2016:

1

		Weighted		Weighted
		Average		Average	Aggregate
		Exercise		Remaining	Intrinsic
	Shares	Price		Life (years)	Value
Outstanding at December 31, 2015	659,533	$	16.62
Forfeited	-		-
Expired / Cancelled	(3,436)		16.15
Exercised	(204,014)		18.80
Outstanding and exercisable at September 30, 2016	452,083	$	15.64	2.1	$	6,709

Stock Awards – The following table provides compensation costs for stock-based compensation related to stock awards:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Stock-based compensation within operations and maintenance expenses	$	131	$	-	$	375	$	365
Income tax benefit		54		-		155		151

The following table summarizes stock award transactions for the nine months ended September 30, 2016:



	Number	Weighted
	of	Average
	Stock Awards	Fair Value
Nonvested stock awards at December 31, 2015	-	$	-
Granted	11,509		32.57
Vested	(11,509)		32.57
Nonvested stock awards at September 30, 2016	-	$	-

The per unit weighted-average fair value at the date of grant for stock awards granted during the nine months ended September 30, 2016 and 2015 was $32.57 and $26.44, respectively.