Southwest Airlines 2014 Annual Report Download - page 118

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Restricted stock units and stock grants
Under the Company’s Amended and Restated 2007 Equity Incentive Plan (“2007 Equity
Plan”), it granted restricted stock units (“RSUs”) to certain Employees during 2012, 2013, and 2014
and performance-based restricted stock units (“PBRSUs”) to certain Employees during 2014. The fair
value of RSUs and PBRSUs is based on the closing price of the Company’s common stock on the date
of grant. Outstanding RSUs vest over three years, subject generally to the individual’s continued
employment or service. The PBRSUs vest on May 14, 2017, subject to the Company’s performance
with respect to a three-year simple average of Return on Invested Capital, before taxes and excluding
special items (“ROIC”), for the period beginning on January 1, 2014 and ending on December 31,
2016, and the individual’s continued employment or service. The number of PBRSUs vesting on the
vesting date will be interpolated based on the average ROIC for the defined performance period, and
ranges from zero PBRSUs at an average ROIC of 12 percent or lower to 200 percent of granted
PBRSUs at an average ROIC of 20 percent or higher. The Company recognizes all expense on a
straight-line basis over the vesting period, with any changes in expense due to the number of PBRSUs
expected to vest being modified on a prospective basis.
In addition, the Company granted approximately 36 thousand shares of unrestricted stock at a
weighted average grant price of $24.91 in 2014, approximately 63 thousand shares at a weighted
average grant price of $14.34 in 2013, and approximately 82 thousand shares at a weighted average
grant price of $8.21 in 2012, to members of its Board of Directors. The fair value of unrestricted stock
grants is also based on the closing price of the Company’s common stock on the date of grant.
A remaining balance of up to ten 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 PBRSUs is summarized below:
All Restricted Stock Units
Units (000)
Wtd. Average
Fair Value
(per share)
Outstanding December 31, 2011, Unvested 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
Granted 1,139 14.34
Vested (1,263) 10.24
Surrendered (168) 9.11
Outstanding December 31, 2013 2,584 11.38
Granted 834 (a) 24.93
Vested (1,239) 11.05
Surrendered (102) 13.18
Outstanding December 31, 2014, Unvested 2,077 $ 16.92
(a) Includes 198 thousand shares of PBRSUs
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