FORM 10-K
91
MDU RESOURCES G ROUP, INC.
NOTE 14 -- STOCK-BASED COMPENSATION
On January 1, 2006, the Company adopted SFAS No. 123 (revised) and on January 1, 2003, adopted SFAS No. 123. For a discussion of the
adoption of SFAS No. 123 (revised) and SFAS No. 123, see Note 1.
The Company has several stock-based compensation plans and is authorized to grant options, restricted stock and stock for up to 17.1 million
shares of common stock and has granted options, restricted stock and stock of 6.9 million shares through December 31, 2007. The Company
generally issues new shares of common stock to satisfy stock option exercises, restricted stock, stock and performance share awards.
Total stock-based compensation expense for the year ended December 31, 2007, was $4.7 million, net of income taxes of $3.1 million. Total
stock-based compensation for the year ended December 31, 2006, was $3.5 million, net of income taxes of $2.2 million.
As of December 31, 2007, total remaining unrecognized compensation expense related to stock-based compensation was approximately
$4.7 million (before income taxes) which will be amortized over a weighted average period of 1.5 years.
Stock options
The Company has stock option plans for directors, key employees and employees. The Company has not granted stock options since
2003. Options granted to key employees automatically vest after nine years, but the plan provides for accelerated vesting based on the
attainment of certain performance goals or upon a change in control of the Company, and expire 10 years after the date of grant. Options
granted to directors and employees vest at the date of grant and three years after the date of grant, respectively, and expire 10 years after
the date of grant.
The fair value of each option outstanding was estimated on the date of grant using the Black-Scholes option-pricing model.
A summary of the status of the stock option plans at December 31, 2007, and changes during the year then ended was as follows:
Weighted
Number of
Average
Shares
Exercise Price
Balance at beginning of year
2,311,546
$13.11
Forfeited
(39,352)
12.97
Exercised
(776,286)
13.15
Balance at end of year
1,495,908
13.09
Exercisable at end of year
1,468,940
$13.08
Summarized information about stock options outstanding and exercisable as of December 31, 2007, was as follows:
Options Outstanding
Options Exercisable
Remaining
Weighted
Aggregate
Weighted
Aggregate
Contractual
Average
Intrinsic
Average
Intrinsic
Range of
Number
Life
Exercise
Value
Number
Exercise
Value
Exercisable Prices
Outstanding
in Years
Price
(000's)
Exercisable
Price
(000's)
$ 8.88 11.00
135,776
.5
$ 9.71
$ 2,431
135,776
$ 9.71
$ 2,431
11.01 14.00
1,262,944
3.2
13.20
18,199
1,241,409
13.20
17,891
14.01 17.13
97,188
3.2
16.39
1,090
91,755
16.40
1,028
Balance at end of year
1,495,908
2.9
$13.09
$21,720
1,468,940
$13.08
$21,350
The aggregate intrinsic value in the preceding table represents the total intrinsic value (before income taxes), based on the Company's
stock price on December 31, 2007, which would have been received by the option holders had all option holders exercised their options as
of that date.
The weighted average remaining contractual life of options exercisable was 2.9 years at December 31, 2007.
The Company received cash of $10.2 million and $4.5 million from the exercise of stock options for the years ended December 31, 2007
and 2006, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2007 and 2006, was $11.2
million and $4.4 million, respectively.
Restricted stock awards
Prior to 2002, the Company granted restricted stock awards under a long-term incentive plan. The restricted stock awards granted vest at
various times ranging from one year to nine years from the date of issuance, but certain grants may vest early based upon the attainment of
certain performance goals or upon a change in control of the Company. The grant-date fair value is the market price of the Company's
stock on the grant date.
