UPS 2015 Annual Report Download - page 117

Download and view the complete annual report

Please find page 117 of the 2015 UPS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 148

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
105
NOTE 11. STOCK-BASED COMPENSATION
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 restricted stock units
and restricted performance units (collectively referred to as "Restricted Units"), stock options and other permitted awards will
reduce the share reserve by one share. We had 24 million shares available to be issued under the Incentive Compensation Plan
as of December 31, 2015.
The primary compensation programs offered under the UPS Incentive Compensation Plan include the UPS Management
Incentive Award program, the Coyote Restricted Stock Award, the UPS Long-Term Incentive Performance Award program and
the UPS Stock Option program. These awards are discussed in the following paragraphs. The total expense recognized in our
income statement under all stock compensation award programs was $574, $536 and $513 million during 2015, 2014 and 2013,
respectively. The associated income tax benefit recognized in our income statement was $215, $199 and $190 million during
2015, 2014 and 2013, respectively. The cash income tax benefit received from the exercise of stock options and the lapsing of
Restricted Units was $252, $261 and $286 million during 2015, 2014 and 2013, respectively.
Management Incentive Award Program ("MIP")
Non-executive management earning the right to receive the Management Incentive Award 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 Award
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). 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 Award 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.
Coyote Restricted Stock Award
In August 2015, we acquired Coyote, a U.S.-based truckload freight brokerage company. During the third quarter of
2015, we granted Restricted Units to certain eligible Coyote management employees. The vesting of Restricted Units granted
under this award will vary between one and four years with an equal number of restricted units vesting at each anniversary date.
The entire grant is expensed on a straight-line basis over the requisite service period (except in the case of death, disability, or
retirement, in which case immediate vesting occurs).
Long-Term Incentive Performance Award granted prior to 2014
We awarded Restricted Units in conjunction with our Long-Term Incentive Performance Award program to certain
eligible employees. The Restricted Units ultimately granted under the Long-Term Incentive Performance Award program are
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 the achievement of an
adjusted earnings per share target, 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, except in the case of death disability, or retirement, in which
case immediate vesting occurs.
As of December 31, 2015, we had the following Restricted Units outstanding, including reinvested dividends, that were
granted under our Management Incentive Award program, Coyote Restricted Stock Award and Long-Term Incentive
Performance Award program (granted prior to 2014):