UPS 2012 Annual Report Download - page 102

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
90
Noncontrolling Interests
We have noncontrolling interests in certain consolidated subsidiaries in our International Package and Supply Chain &
Freight segments, the largest of which relates to a joint venture that operates in the Middle East, Turkey, and portions of the
Central Asia region. The activity related to our noncontrolling interests is presented below (in millions):
2012 2011 2010
Noncontrolling Interests
Balance at beginning of period $ 73 $ 68 $ 66
Acquired noncontrolling interests 7 5 2
Dividends attributable to noncontrolling interests — — —
Net income attributable to noncontrolling interests — — —
Balance at end of period $ 80 $ 73 $ 68
NOTE 10. STOCK-BASED COMPENSATION
Incentive Compensation Plan
The UPS Incentive Compensation Plan permits the grant of nonqualified and incentive stock options, stock appreciation
rights, restricted stock and stock units, and restricted performance shares and units, to eligible employees. The number of shares
reserved for issuance under the Incentive Compensation Plan is 27 million. Each share issued pursuant to an option and each
share issued subject to the 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
one share. As of December 31, 2012, stock options, restricted performance units and restricted stock units had been granted
under the Incentive Compensation Plan. We had 27 million shares available to be issued under the Incentive Compensation
Plan as of December 31, 2012.
Management Incentive Award
Non-executive management earning the right to receive Management Incentive Awards are determined annually by the
Salary Committee, which is comprised of executive officers of the Company. Awards granted to executive officers are
determined annually by the Compensation Committee of the UPS Board of Directors. Our Management Incentive Awards
program provides, with certain exceptions, that one-half to two-thirds of the annual Management Incentive Award will be made
in Restricted Units (depending upon the level of management involved), which generally vest over a five-year period. The other
one-third to one-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.
Upon vesting, Restricted Units 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, Restricted Units granted for our Management
Incentive Awards and previous Long-Term Incentive Program 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 Restricted Units granted are subject to earlier cancellation or vesting under certain conditions. Dividends
earned on Restricted Units are reinvested in additional Restricted Units at each dividend payable date.
Long-Term Incentive Performance Award
We also award Restricted Units in conjunction with our Long-Term Incentive Performance Awards program to certain
eligible employees. The Restricted Units ultimately granted under the Long-Term Incentive Performance Awards program 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 per share, over the entire three year performance award cycle. The Restricted Units granted under this program vest at
the end of the three year performance award cycle.