UPS 2009 Annual Report Download - page 103

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
exercised portion of a stock appreciation right will reduce the share reserve by one share. Each share issued
pursuant to restricted stock and stock units, and restricted performance shares and units, will reduce the share
reserve by 2.76 shares. As of December 31, 2009, management incentive awards, stock options, restricted
performance units, and restricted stock units had been granted under the Incentive Compensation Plan. We had
65.7 million shares available to be issued under the Incentive Compensation Plan as of December 31, 2009.
Management Incentive Awards & Restricted Stock Units
Persons earning the right to receive management incentive awards are determined annually by the
Compensation Committee of the UPS Board of Directors. Our management incentive awards program provides
that half of the annual management incentive award, with certain exceptions, be made in restricted stock units
(“RSUs”), which generally vest over a five-year period. The other half of the award is in the form of cash or
unrestricted shares of class A common stock and is fully vested at the time of grant. These management incentive
awards are generally granted in the fourth quarter of each year.
Upon vesting, RSUs result in the issuance of the equivalent number of UPS class A common shares after
required tax withholdings. Except in the case of death, disability, or retirement, RSUs granted for our
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, 2009, 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, 2009 ........ 13,440 $61.77
Vested .......................... (4,748) 65.93
Granted ......................... 4,965 56.57
Reinvested Dividends .............. 478 N/A
Forfeited / Expired ................ (254) 59.90
Nonvested at December 31, 2009 ..... 13,881 $58.82 2.10 $796
RSUs Expected to Vest ............. 13,395 $58.93 2.06 $768
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 2009, 2008, and 2007 was $56.57, $46.56,
and $74.94, respectively. The total fair value of RSUs vested was $246, $141, and $145 million in 2009, 2008,
and 2007, respectively. As of December 31, 2009, there was $586 million of total unrecognized compensation
cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of 3 years
and 4 months.
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