Stock Incentive Plans

 

On May 19, 2011, Quanta’s stockholders approved the Quanta Services, Inc. 2011 Omnibus Equity Incentive Plan (the 2011 Plan). Quanta’s Board of Directors had previously adopted and approved the 2011 Plan on January 26, 2011, subject to stockholder approval. The 2011 Plan provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards (including cash bonus awards) or any combination of the foregoing. The purpose of the 2011 Plan is to provide participants with additional performance incentives by increasing their proprietary interest in Quanta. Employees, directors, officers, consultants or advisors of Quanta or its affiliates are eligible to participate in the 2011 Plan, as are prospective employees, directors, officers, consultants or advisors of Quanta who have agreed to serve Quanta in those capacities. An aggregate of 11,750,000 shares of common stock may be issued pursuant to awards granted under the 2011 Plan.

 

Additionally, pursuant to the Quanta Services, Inc. 2007 Stock Incentive Plan (the 2007 Plan), which was adopted on May 24, 2007, Quanta may award restricted common stock, incentive stock options and non-qualified stock options to eligible employees, directors, and certain consultants and advisors. On May 18, 2011, Quanta registered an additional 178,815 shares of common stock available pursuant to the terms of the 2007 Plan.

 

Awards also remain outstanding under a prior plan adopted by Quanta, as well as under plans assumed by Quanta in connection with its acquisition of InfraSource Services, Inc. in 2007. While no further awards may be made under these plans, the awards outstanding under the plans continue to be governed by their terms. These plans, together with the 2011 Plan and the 2007 Plan, are referred to as the Plans.

 

Restricted Stock

 

Restricted common stock has been issued under the Plans at the fair market value of the common stock as of the date of issuance. The shares of restricted common stock issued are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs over three or four years in equal annual installments. During the restriction period, holders are entitled to vote and receive dividends on such shares.

 

During the three months ended June 30, 2011 and 2010, Quanta granted 67,198 and 53,919 shares of restricted stock under the Plans with a weighted average grant price of $19.90 and $20.86. During the six months ended June 30, 2011 and 2010, Quanta granted 0.9 and 1.1 million shares of restricted stock under the Plans with a weighted average grant price of $22.16 and $19.20. Additionally, during the three months ended June 30, 2011 and 2010, 55,128 and 53,539 shares vested with an approximate fair value at the time of vesting of $1.1 million and $1.1 million. During the six months ended June 30, 2011 and 2010, 0.9 and 0.7 million shares vested with an approximate fair value at the time of vesting of $20.0 million and $13.0 million.

 

As of June 30, 2011, there was approximately $29.0 million of total unrecognized compensation cost related to unvested restricted stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.0 years.

 

Non-Cash Compensation Expense and Related Tax Benefits

 

The amounts of non-cash compensation expense and related tax benefits, as well as the amount of actual tax benefits related to vested restricted stock and options exercised are as follows (in thousands):

 

 

Restricted Stock Units

 

The 2011 Plan provides for the award of restricted stock units (RSUs) to employees, directors and certain consultants and advisors of Quanta. In addition, the Restricted Stock Unit Plan (the RSU Plan) adopted by Quanta in 2010 provides for the award of RSUs to certain employees and consultants of Quanta’s Canadian operations. RSUs are intended to provide cash performance incentives that are substantially equivalent to the risks and rewards of equity ownership in Quanta by providing the participants with rights to receive a cash bonus that is determined by reference to Quanta’s common stock price. The number of RSUs awarded to grantees is determined based on the dollar amount of the grant and the closing price on the date of grant of a share of Quanta common stock. The RSUs vest over a designated period, typically three years, and are subject to forfeiture under certain conditions, primarily termination of service. Upon vesting of RSU’s, the holders receive a cash bonus equal to the number of RSUs vested multiplied by Quanta’s common stock price on the vesting date.

 

Compensation expense related to RSUs was $0.2 million for both the three months ended June 30, 2011 and 2010 and $0.5 million and $0.2 million for the six months ended June 30, 2011 and 2010. Such expense is recorded in selling, general and administrative expenses. As the RSUs are settled only in cash, they are not included in the calculation of earnings per share and the estimated earned value of the RSUs is classified as a liability. Liabilities recorded under the RSUs were $0.6 million and $0.2 million at June 30, 2011 and December 31, 2010.