Employee Stock and Incentive Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

Employee Stock and Incentive Plans [Text Block]

EMPLOYEE STOCK AND INCENTIVE PLANS

Employee Stock Ownership Plan. We sponsor an ESOP within the RSOP. Eligible employees may contribute to the RSOP plan as of their date of hire. The dividends received by the ESOP are distributed to participants. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. ESOP employer allocations are funded with contributions paid in either cash or the issuance of ALLETE common stock at the Company’s discretion. We record compensation expense equal to the cash or current market price of stock contributed. ESOP compensation expense was $10.8 million in 2019 ($11.4 million in 2018; $11.0 million in 2017).

According to the accounting standards for stock compensation, unallocated shares of ALLETE common stock held and purchased by the ESOP were treated as unearned ESOP shares and not considered outstanding for earnings per share computations. All ESOP shares have been allocated to participants as of December 31, 2019, 2018 and 2017.

Stock-Based Compensation.

Stock Incentive Plan. Under our Executive Long-Term Incentive Compensation Plan (Executive Plan), share-based awards may be issued to key employees through a broad range of methods, including non-qualified and incentive stock options, performance shares, performance units, restricted stock, restricted stock units, stock appreciation rights and other awards. There are 0.8 million shares of ALLETE common stock reserved for issuance under the Executive Plan, of which 0.7 million of these shares remain available for issuance as of December 31, 2019.

NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS (Continued)

Stock-Based Compensation (Continued)

The following types of share-based awards were outstanding in 2019, 2018 or 2017:

Performance Shares. Under the performance share awards, the number of shares earned is contingent upon attaining specific market and performance goals over a three-year performance period. Market goals are measured by total shareholder return relative to a group of peer companies while performance goals are measured by earnings per share growth. In the case of qualified retirement, death, or disability during a performance period, a pro rata portion of the award will be earned at the conclusion of the performance period based on the market goals achieved. In the case of termination of employment for any reason other than qualified retirement, death, or disability, no award will be earned. If there is a change in control, a pro rata portion of the award will be paid based on the greater of actual performance up to the date of the change in control or target performance. The fair value of these awards incorporates the probability of meeting the total shareholder return goals. Compensation cost is recognized over the three-year performance period based on our estimate of the number of shares which will be earned by the award recipients.

Restricted Stock Units. Under the restricted stock unit awards, shares for participants eligible for retirement vest monthly over a three-year period. For participants not eligible for retirement, shares vest at the end of the three-year period. In the case of qualified retirement, death or disability, a pro rata portion of the award will be earned. In the case of termination of employment for any reason other than qualified retirement, death or disability, no award will be earned. If there is a change in control, a pro rata portion of the award will be earned. The fair value of these awards is equal to the grant date fair value. Compensation cost is recognized over the three-year vesting period based on our estimate of the number of shares which will be earned by the award recipients.

Employee Stock Purchase Plan (ESPP). Under our ESPP, eligible employees may purchase ALLETE common stock at a 5 percent discount from the market price; we are not required to apply fair value accounting to these awards as the discount is not greater than 5 percent.

RSOP. The RSOP is a contributory defined contribution plan subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended, and qualifies as an employee stock ownership plan and profit sharing plan. The RSOP provides eligible employees an opportunity to save for retirement.

The following share-based compensation expense amounts were recognized in our Consolidated Statement of Income for the periods presented.



Share-Based Compensation Expense
Year Ended December 31	2019		2018		2017
Millions
Performance Shares		$2.3		$2.3		$2.1
Restricted Stock Units	0.8		0.9		1.0
Total Share-Based Compensation Expense		$3.1		$3.2		$3.1
Income Tax Benefit		$0.9		$0.9		$0.9

There were no capitalized share-based compensation costs during the years ended December 31, 2019, 2018 or 2017.

As of December 31, 2019, the total unrecognized compensation cost for the performance share awards and restricted stock units not yet recognized in our Consolidated Statement of Income was $2.2 million and $0.9 million, respectively. These amounts are expected to be recognized over a weighted-average period of 1.6 years.

NOTE 13. EMPLOYEE STOCK AND INCENTIVE PLANS (Continued)

Stock-Based Compensation (Continued)

Performance Shares. The following table presents information regarding our non-vested performance shares.



	2019				2018				2017
	Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value
Non-vested as of January 1	129,693			$66.12	127,898			$58.23	127,580			$52.56
Granted (a)	60,747			$63.89	66,557			$76.42	50,729			$62.90
Awarded	(75,943	)	$53.44		(58,293	)		$59.82	—		—
Unearned Grant Award	—		—		—		—		(40,801	)		$46.27
Forfeited	(14,912	)		$77.14	(6,469	)		$72.99	(9,610	)		$58.29
Non-vested as of December 31	99,585			$72.78	129,693			$66.12	127,898			$58.23

(a) Shares granted include accrued dividends.

There were approximately 22,000 performance shares granted in January 2020 for the three-year performance period ending in 2022. The ultimate issuance is contingent upon the attainment of certain goals of ALLETE during the performance periods. The grant date fair value of the performance shares granted was $1.8 million. There were approximately 25,000 performance shares awarded in February 2020. The grant date fair value of the shares awarded was $1.6 million.

Restricted Stock Units. The following table presents information regarding our available restricted stock units.



	2019				2018				2017
	Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value		Number of Shares		Weighted- Average Grant Date Fair Value
Available as of January 1	49,771			$60.74	55,248			$56.18	54,728			$51.79
Granted (a)	13,927			$74.93	16,573			$71.11	21,241			$62.20
Awarded	(21,110	)		$52.44	(18,881	)		$55.78	(17,281	)		$49.72
Forfeited	(2,645	)		$72.43	(3,169	)		$64.92	(3,440	)		$56.00
Available as of December 31	39,943			$69.30	49,771			$60.74	55,248			$56.18

(a) Shares granted include accrued dividends.

There were approximately 14,000 restricted stock units granted in January 2020 for the vesting period ending in 2022. The grant date fair value of the restricted stock units granted was $1.1 million. There were approximately 15,000 restricted stock units awarded in February 2020. The grant date fair value of the shares awarded was $0.9 million.