COMMON EQUITY

Stock Option Activity: The following table identifies non-qualified stock options granted by the Compensation Committee of the Board of Directors (Compensation Committee):



	2014			2013

Non-qualified stock options granted year to date	899,500			1,418,560

Estimated fair value per non-qualified stock option	$	4.18		$	3.45

Assumptions used to value the options using a binomial option pricing model:
Risk-free interest rate	0.1% - 3.0%			0.1% - 1.9%
Dividend yield	3.8		%	3.7		%
Expected volatility	18.0		%	18.0		%
Expected forfeiture rate	2.0		%	2.0		%
Expected life (years)	5.8			5.9

The risk-free interest rate is based on the U.S. Treasury interest rate whose term is consistent with the expected life of the stock options. Dividend yield, expected volatility, expected forfeiture rate and expected life assumptions are based on our historical experience.

The following is a summary of our stock option activity for the three and six months ended June 30, 2014:



					Weighted-
					Average
			Weighted-		Remaining	Aggregate
	Number of		Average		Contractual Life	Intrinsic Value
Stock Options	Options		Exercise Price		(Years)	(Millions)
Outstanding as of April 1, 2014	8,276,994		$	28.82
Granted	—		$	—
Exercised	(96,791	)	$	24.07
Forfeited	(10,810	)	$	37.94
Outstanding as of June 30, 2014	8,169,393		$	28.87

Outstanding as of January 1, 2014	8,089,710		$	26.84
Granted	899,500		$	41.03
Exercised	(802,622	)	$	21.89
Forfeited	(17,195	)	$	36.73
Outstanding as of June 30, 2014	8,169,393		$	28.87	5.6	$	147.5

Exercisable as of June 30, 2014	5,253,148		$	23.82	3.9	$	121.3

The intrinsic value of options exercised was $2.2 million and $17.5 million for the three and six months ended June 30, 2014, and $11.6 million and $36.0 million for the same periods in 2013, respectively. Cash received from options exercised was $17.6 million and $40.7 million for the six months ended June 30, 2014 and 2013, respectively. The actual tax benefit realized for the tax deductions from option exercises for the same periods was $7.0 million and $14.4 million, respectively.

All outstanding stock options to purchase shares of common stock were included in the computation of diluted earnings per share during the second quarter of 2014.

The following table summarizes information about stock options outstanding as of June 30, 2014:



	Options Outstanding				Options Exercisable
		Weighted-Average				Weighted-Average
				Remaining				Remaining
	Number of	Exercise		Contractual	Number of	Exercise		Contractual
Range of Exercise Prices	Options	Price		Life (Years)	Options	Price		Life (Years)
$17.10 to $21.11	1,682,973	$	20.67	3.8	1,682,973	$	20.67	3.8
$23.88 to $29.35	3,356,060	$	24.66	3.7	3,356,060	$	24.66	3.7
$34.88 to $41.03	3,130,360	$	37.78	8.5	214,115	$	35.50	7.7
	8,169,393	$	28.87	5.6	5,253,148	$	23.82	3.9

The following table summarizes information about our non-vested options during the three and six months ended June 30, 2014:



			Weighted-Average
Non-Vested Stock Options	Number of Options		Fair Value
Non-vested as of April 1, 2014	2,939,015		$	3.65
Granted	—		$	—
Vested	(11,960	)	$	3.65
Forfeited	(10,810	)	$	3.65
Non-vested as of June 30, 2014	2,916,245		$	3.65

Non-vested as of January 1, 2014	2,380,790		$	3.38
Granted	899,500		$	4.18
Vested	(346,850	)	$	3.22
Forfeited	(17,195	)	$	3.56
Non-vested as of June 30, 2014	2,916,245		$	3.65

As of June 30, 2014, total compensation costs related to non-vested stock options not yet recognized was approximately $3.9 million, which is expected to be recognized over the next 19 months on a weighted-average basis.

Restricted Shares: The following restricted stock activity occurred during the three and six months ended June 30, 2014:



			Weighted-Average
Restricted Shares	Number of Shares		Grant Date Fair Value
Outstanding as of April 1, 2014	157,595
Granted	—		$	—
Released	—		$	—
Forfeited	(827	)	$	38.83
Outstanding as of June 30, 2014	156,768

Outstanding as of January 1, 2014	150,698
Granted	71,504		$	40.96
Released	(63,509	)	$	33.02
Forfeited	(1,925	)	$	38.38
Outstanding as of June 30, 2014	156,768

We record the market value of the restricted stock awards on the date of grant, and then we charge their value to expense over the vesting period of the awards. The intrinsic value of restricted stock vesting was zero and $2.7 million for the three and six months ended June 30, 2014, and $0.8 million and $4.0 million for the same periods in 2013, respectively. The actual tax benefit realized for the tax deductions from released restricted shares was zero and $1.0 million for the three and six months ended June 30, 2014, and $0.2 million and $1.3 million for the same periods in 2013, respectively.

As of June 30, 2014, total compensation cost related to restricted stock not yet recognized was approximately $4.1 million, which is expected to be recognized over the next 24 months on a weighted-average basis.

Performance Units: In January 2014 and 2013, the Compensation Committee granted 233,735 and 239,120 performance units, respectively, to officers and other key employees under the Wisconsin Energy Performance Unit Plan. Performance units earned as of December 31, 2013 and 2012 vested and were settled during the first quarter of 2014 and 2013, and had a total intrinsic value of $14.8 million and $19.3 million, respectively. The actual tax benefit realized for the tax deductions from the settlement of performance units was approximately $5.3 million and $7.0 million, respectively. As of June 30, 2014, total compensation cost related to performance units not yet recognized was approximately $12.8 million, which is expected to be recognized over the next 25 months on a weighted-average basis.

Restrictions: Wisconsin Energy's ability as a holding company to pay common dividends primarily depends on the availability of funds received from its non-utility subsidiary, We Power, and its utility subsidiaries. Various financing arrangements and regulatory requirements impose certain restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. In addition, under Wisconsin law, Wisconsin Electric and Wisconsin Gas are prohibited from loaning funds, either directly or indirectly, to Wisconsin Energy. See Note H -- Common Equity in our 2013 Annual Report on Form 10-K for additional information on these and other restrictions.

We do not believe that these restrictions will materially affect our operations or limit any dividend payments in the foreseeable future.

Share Repurchase Program: In December 2013, our Board of Directors authorized a share repurchase program for the purchase of up to $300 million of our common stock through open market purchases or privately negotiated transactions from January 1, 2014 through the end of 2017. On June 22, 2014, in connection with the Acquisition, the Board of Directors terminated this share repurchase program. The previous share repurchase program authorized by our Board of Directors expired at the end of 2013. For the six months ended June 30, 2014, we repurchased $18.6 million of our common stock pursuant to the recently terminated program at an average cost of $43.66 per share. All of these shares were purchased during the first quarter of 2014. In addition, we have instructed our independent agents to purchase shares on the open market to fulfill exercised stock options and restricted stock awards. The following table identifies shares purchased in the following periods:



	Six Months Ended June 30
	2014			2013
	Shares	Cost		Shares	Cost
	(In Millions)

Under share repurchase programs	0.4	$	18.6	1.3	$	54.7
To fulfill exercised stock options and restricted stock awards	0.9	38.7		2.0	81.0
Total	1.3	$	57.3	3.3	$	135.7