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Stock-Based Compensation
9 Months Ended
Sep. 30, 2011
Stock-Based Compensation 
Stock-Based Compensation
10. STOCK-BASED COMPENSATION
   
Three Months Ended September 30,
   
Nine Months Ended September 30,
 
   
2011
    
2010
    
2011
    
2010
  
Total stock-based compensation costs (millions):
                        
Restricted stock and restricted stock units
  $ 1.6     $ 1.3     $ 6.0     $ 6.2  
Stock options, performance awards and other
    0.3       0.4       1.1       1.5  
Less: costs capitalized as part of inventory
     -       (0.1 )     (0.4 )     (0.3 )
Expense included in selling, general and administrative and advanced technology costs
   $ 1.9     $ 1.6     $ 6.7     $ 7.4  
Total after-tax expense
  $ 1.2     $ 1.1     $ 4.3     $ 4.8  
                                 
Additional information:
                                
Stock options exercised
    -       92,754       -       115,630  
Intrinsic value of stock options exercised (millions)
    -     $ 0.1       -     $ 0.2  
Cash received from exercise of stock options (millions)
     -     $ 0.4       -     $ 0.5  


Assumptions used in the Black-Scholes option pricing model to value option grants follow. There were no stock options granted in the three and nine months ended September 30, 2011.

 
Three Months Ended September 30, 
Nine Months Ended September 30, 
 
2011
2010
2011
2010
Risk-free interest rate
-
0.78%
-
0.78
–
1.43%
Expected dividend yield
-
-
-
  
-
  
Expected volatility
-
75%
-
72
–
75%
Expected option life (years)
-
4.1
-
4
–
4.1
Weighted-average grant date fair value
-
$3.09
-
$2.81
Options granted
0
6,968
0
773,018

As of September 30, 2011, there was $8.7 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based payments granted, of which $7.7 million relates to restricted shares and restricted stock units, and $1.0 million relates to stock options. That cost is expected to be recognized over a weighted-average period of 1.8 years.

Revised Long-Term Incentive Program

In February 2011, the Board of Directors approved a revised long-term incentive program under the 2009 Equity Incentive Plan for certain participating executives. The revised long-term incentive plan has three components: (1) time-based restricted stock that vests over three years, (2) performance-based restricted stock that, subject to being earned, vests over three years, and (3) a three-year performance-based cash incentive program.

The performance-based restricted stock vests over three years and is subject to being earned based on performance during 2011. Actual awards will be determined by performance during the period January 1, 2011 through December 31, 2011 against a performance goal relating to USEC's total shareholder return compared to the Russell 2000 total shareholder return (without dividends). This award is classified as equity and is valued at the award date using a Monte Carlo model. The target number of shares of restricted stock was calculated based on USEC's stock price on March 1, 2011.  Award valuation factors associated with the underlying performance of USEC's stock price and shareholder returns over the term of the award include:

·  
Total stock return volatility based on historical volatility over one year using daily stock price observations,
 
·  
Risk-free interest rate reflecting the yield on the one-year Treasury bonds on grant date,
 
·  
Beta calculated using one year of daily returns and comparing the risk of the individual securities to the Russell 2000 Index, and
 
·  
For USEC and each of the companies in the Russell 2000 index, actual stock return from the beginning of the performance period through the grant date (January 1, 2011 – March 1, 2011) has been incorporated in the projection of the ultimate payout.

The new three-year performance-based cash incentive program includes a new overlapping three-year performance period each year. The first performance period runs from January 1, 2011 through December 31, 2013. Actual payout of awards will be determined by the performance of the Company during the performance period against two pre-determined performance goals. Cash awards earned will be granted following the completion of the performance period. This award is classified as a liability. The liability will be re-measured each reporting period based on the status of the performance against the performance goals.