Union Pacific 2007 Annual Report Download - page 75

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71
Retention awards are granted at no cost to the employee or non-employee director and vest over periods
lasting up to four years. At December 31, 2007, there was $38 million of total unrecognized compensation
expense related to nonvested retention awards, which is expected to be recognized over a weighted-average
period of 2.1 years.
Performance Retention Awards – In January 2007, our Board of Directors approved performance stock unit
grants. Other than raising the performance targets, the basic terms of these performance stock units are
identical to those granted in January 2006, including annual return on invested capital (ROIC) as the
performance measure. Stock units awarded to selected employees under these grants are subject to continued
employment for 37 months and the attainment of certain levels of ROIC. We will expense the fair value of the
units that are probable of being earned based on our forecasted ROIC over the 3-year performance period. We
measure the fair value of these performance stock units based upon the closing price of the underlying
common stock as of the date of grant, reduced by the present value of estimated future dividends. Dividend
equivalents are paid to participants only after the units are earned.
The assumptions used to calculate the present value of estimated future dividends are as follows:
2007
Dividend per share per quarter....................................................................................................... $0.35
Risk-free interest rate at date of grant ............................................................................................ 4.9%
Changes in our performance retention awards during 2007 were as follows:
Shares
(thous.)
Weighted-Average
Grant-Date Fair Value
Nonvested at January 1, 2007 ................................................................ 122 $86.05
Granted ................................................................................................... 173 93.72
Vested...................................................................................................... - -
Forfeited .................................................................................................. (1) 93.72
Nonvested at December 31, 2007 .......................................................... 294 $90.53
At December 31, 2007, there was $15 million of total unrecognized compensation expense related to
nonvested performance retention awards, which is expected to be recognized over a weighted-average period
of 1.7 years. A portion of this expense is subject to achievement of the ROIC levels established for the
performance stock unit grants.