UPS 2007 Annual Report Download - page 95

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
management incentive awards generally vest over a five year period with approximately 20% of the award
vesting at each anniversary date of the grant. The entire grant is expensed on a straight-line basis over the
requisite service period. All RSUs granted are subject to earlier cancellation or vesting under certain conditions.
Dividends earned on management incentive award RSUs are reinvested in additional RSUs at each dividend
payable date.
We also award RSUs in conjunction with our long-term incentive performance awards program to certain
eligible employees. The RSUs ultimately granted under the long-term incentive performance award will be based
upon the achievement of certain performance measures, including growth in consolidated revenue and operating
return on invested capital, each year during the performance award cycle, and other measures, including growth
in consolidated earnings, over the entire three year performance award cycle.
As of December 31, 2007, we had the following RSUs outstanding, including reinvested dividends:
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Weighted Average Remaining
Contractual Term
(in years)
Aggregate Intrinsic
Value (in millions)
Nonvested at January 1, 2007 ......... 7,561 $73.82
Vested ........................... (1,855) 73.71
Granted ........................... 4,507 74.94
Reinvested Dividends ............... 154 N/A
Forfeited / Expired .................. (385) 73.97
Nonvested at December 31, 2007 ...... 9,982 74.34 2.37 $706
RSUs Expected to Vest .............. 9,431 74.31 2.31 $667
The fair value of each RSU is the New York Stock Exchange (“NYSE”) closing price on the date of grant.
The weighted-average grant date fair value of RSUs granted during 2007, 2006, and 2005 was $74.94, $74.87,
and $72.82, respectively. The total fair value of RSUs vested was $145 million, $82 million, and $0 in 2007,
2006, and 2005, respectively. As of December 31, 2007, there was $529 million of total unrecognized
compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average
period of 4 years and 1 month.
Nonqualified Stock Options
We maintain fixed stock option plans, under which options are granted to purchase shares of UPS class A
common stock. Stock options granted in connection with the Incentive Compensation Plan must have an exercise
price at least equal to the NYSE closing price of UPS class B common stock on the date the option is granted.
Persons earning the right to receive stock options are determined each year by the Compensation
Committee. Except in the case of death, disability, or retirement, options granted under the Incentive
Compensation Plan prior to 2008 are generally exercisable three to five years from the date of grant and before
the expiration of the option 10 years after the date of grant. Beginning in 2008, option awards will be made to a
more limited group of employees, and options granted will generally vest over a five year period with
approximately 20% of the award vesting at each anniversary date of the grant. All options granted are subject to
earlier cancellation or exercise under certain conditions. Option holders may exercise their options via the tender
of cash or class A common stock, and new class A shares are issued upon exercise. Options granted to eligible
employees will generally be granted annually during the second quarter of each year at the discretion of the
Compensation Committee.
F-32