Southwest Airlines 2012 Annual Report Download - page 119

82 thousand shares of unrestricted stock at weighted average grant price of $8.21 in 2012 and 33 thousand shares
at weighted average grant price of $12.26 in 2011 to members of its Board of Directors. The fair value of RSUs
and unrestricted stock grants is based on the closing price of the Company’s common stock on the date of grant.
Outstanding RSUs vest over three years, subject to the individual’s continued employment or service. The
Company recognizes expense on a straight-line basis over the vesting period. A remaining balance of up to
11 million shares of the Company’s common stock may be issued pursuant to grants under the 2007 Equity Plan.
Aggregated information regarding the Company’s RSUs and stock grants is summarized below:
RESTRICTED STOCK UNITS
Units (000)
Wtd. Average
Fair Value
Outstanding December 31, 2009 ................................ — $ —
Granted .................................................. 997 12.28
Vested ................................................... — —
Surrendered .............................................. (7) 12.28
Outstanding December 31, 2010 ................................ 990 12.28
Granted .................................................. 1,007 12.27
Vested ................................................... (327) 12.28
Surrendered .............................................. (30) 12.28
Outstanding December 31, 2011 ................................ 1,640 12.27
Granted .................................................. 1,939 8.21
Vested ................................................... (644) 12.27
Surrendered .............................................. (59) 10.54
Outstanding December 31, 2012 ................................ 2,876 $ 9.57
Stock options
The Company has previously awarded stock options under plans covering Employees subject to collective
bargaining agreements (collective bargaining plans) and plans covering other Employees and members of the
Board of Directors (other Employee plans). None of the collective bargaining plans were required to be approved
by Shareholders. Options granted to Employees under collective bargaining plans are non-qualified, granted at or
above the fair value of the Company’s common stock on the date of grant, and generally have terms ranging from
six to twelve years. Neither Executive Officers nor members of the Company’s Board of Directors are eligible to
participate in any of the collective bargaining plans. Options granted to Employees and members of the Board of
Directors through other Employee plans are both qualified as incentive stock options under the Internal Revenue
Code of 1986 and non-qualified stock options, granted at no less than the fair value of the Company’s common
stock on the date of grant, and have ten-year terms. All of the options included in other Employee plans have
been approved by Shareholders, except one plan covering non-management, non-contract Employees, which did
not require Shareholder approval and had options outstanding to purchase approximately 1 million shares of the
Company’s common stock as of December 31, 2012. Although the Company does not have a formal policy, upon
option exercise, the Company will typically issue treasury stock, to the extent such shares are available.
Vesting terms for the collective bargaining plans differ based on the grant made, and have ranged in length
from immediate vesting to vesting periods in accordance with the period covered by the respective collective
bargaining agreement. For other Employee plans, options vest and generally become fully exercisable over three,
five, or ten years of continued employment, depending upon the grant type. For grants in any of the Company’s
plans that are subject to graded vesting over a service period, the Company recognizes expense on a straight-line
basis over the requisite service period for the entire award. None of the Company’s grants include performance-
based or market-based vesting conditions, as defined.
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