UPS 2014 Annual Report Download - page 113

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UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
101
The fair value of each Restricted Unit is the NYSE closing price of class B common stock on the date of grant. The
weighted-average grant date fair value of Restricted Units granted during 2014, 2013 and 2012 was $92.35, $80.18 and $77.21,
respectively. The total fair value of Restricted Units vested was $579, $510 and $627 million in 2014, 2013 and 2012,
respectively. As of December 31, 2014, there was $483 million of total unrecognized compensation cost related to nonvested
Restricted Units. That cost is expected to be recognized over a weighted average period of three years.
Long-Term Incentive Performance Award granted in 2014
Beginning with the Long-Term Incentive Performance grant in 2014, the performance targets are equally-weighted
among consolidated operating return on invested capital, growth in consolidated revenue, and total shareowner return relative to
a peer group of companies. The Restricted Units granted under this award generally vest at the end of a three-year period
(except in the case of death disability, or retirement, in which case immediate vesting occurs on a prorated basis). The number
of Restricted Units earned will be based on the percentage achievement of the performance targets set forth on the grant date.
The range of percentage achievement can vary from 0% to 200% of the target award.
For the two-thirds of the award related to consolidated operating return on invested capital and growth in consolidated
revenue, we recognize the grant-date fair value of these units (less estimated forfeitures) as compensation expense ratably over
the vesting period, based on the number of awards expected to be earned. The remaining one-third of the award related to total
shareowner return relative to a peer group is valued using a Monte Carlo model. This portion of the award was valued at a share
payout of 109.84% of the target grant, and is recognized as compensation expense (less estimated forfeitures) ratably over the
vesting period.
As of December 31, 2014, we had the following Restricted Units outstanding, including reinvested dividends, that were
granted under our 2014 Long-Term Incentive Performance Award:
Shares
(in thousands)
Weighted
Average
Grant Date
Fair Value
Weighted Average Remaining
Contractual Term
(in years)
Aggregate Intrinsic
Value (in millions)
Nonvested at January 1, 2014 — $ —
Vested (28) 96.98
Granted 932 96.98
Reinvested Dividends 17 N/A
Forfeited / Expired (106) 96.98
Nonvested at December 31, 2014 815 $ 96.98 2.08 $ 91
Performance Units Expected to Vest 777 $ 96.98 2.08 $ 86
The fair value of each Restricted Unit is the NYSE closing price of class B common stock on the date of grant. The
weighted-average grant date fair value of Restricted Units granted during 2014 was $96.98. The total fair value of Restricted
Units vested was $2 million in 2014. As of December 31, 2014, there was $54 million of total unrecognized compensation cost
related to nonvested Restricted Units. That cost is expected to be recognized over a weighted average period of two years.
Nonqualified Stock Options
We maintain fixed stock option plans, under which options are granted to purchase shares of UPS class A common stock.
Stock options granted in connection with the Incentive Compensation Plan must have an exercise price at least equal to the
NYSE closing price of UPS class B common stock on the date the option is granted.
Executive officers and certain senior managers receive a non-qualified stock option grant annually, in which the value
granted is determined as a percentage of salary. Options granted generally vest over a five year period with approximately 20%
of the award vesting at each anniversary date of the grant. All options granted are subject to earlier cancellation or vesting under
certain conditions. Option holders may exercise their options via the tender of cash or class A common stock, and new class A
shares are issued upon exercise.