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Subsequent Events
 3 Months Ended
Mar. 31, 2024
Subsequent Events [Abstract]  
Subsequent Events Subsequent Events
On April 11, 2024, the Company filed its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware, which, among other things, effected the authorization of 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock, as well as the reclassification of all shares of the Company’s Class A common stock outstanding into shares of Class B common stock. The amended and restated certificate of incorporation, as well as the Company’s amended and restated bylaws, became effective upon such filing.
On April 16, 2024, the Company completed its initial public offering of an aggregate of 38,870,000 shares of Class A common stock by UL Standards & Engagement at a price to the public of $28.00 per share, which includes the exercise in full by the underwriters of their overallotment option to purchase an additional 5,070,000 shares of Class A common stock. The Company did not receive any proceeds from the IPO. Upon completion of the IPO, UL Standards & Engagement beneficially owned 80.6% of UL Solutions’ outstanding capital stock and held 97.6% of the voting power of UL Solutions’ outstanding capital stock. As a result, the Company meets the definition of a “controlled company” within the meaning of the corporate governance rules of the New York Stock Exchange.
In connection with the IPO, the Company adopted the UL Solutions Inc. 2024 Long-Term Incentive Plan (the “2024 LTIP”) and reserved for issuance 20,000,000 shares of Class A common stock pursuant to equity awards approved under the 2024 LTIP and the UL Solutions Inc. Long-Term Incentive Plan (formerly known as the UL Inc. Long-Term Incentive Plan) (the “Pre-IPO LTIP”). As of March 31, 2024, 3,452,120 CSARs were outstanding. On April 1, 2024, 1,334,640 CSARs reached the end of their contractual term, which will result in cash payments of approximately $18 million in the second quarter of 2024. Upon completion of the IPO on April 16 2024, 1,978,761 CSARs were converted to the same number of stock-settled stock appreciation rights, and will result in a reclassification of approximately $25 million from accrued compensation and benefits to additional paid-in capital on the Company’s Condensed Consolidated Balance Sheet. The CSARs were remeasured to fair value at the conversion date, which will result in additional pre-tax compensation expense of approximately $9 million in the second quarter of 2024, primarily within selling, general and administrative expenses. As equity-settled awards, the fair value of the stock-settled stock appreciation rights was determined on the conversion date and, generally, will not be remeasured unless the awards are modified. Following these maturities and conversions, as well as forfeitures that occurred prior to the IPO, 118,904 CSARs remained outstanding. As cash-settled awards, CSARs are remeasured to fair value at each reporting date.
The Pre-IPO LTIP permits settlement of outstanding Performance Cash awards in shares of the Company’s Class A common stock. As such, upon vesting the Performance Cash awards may be settled in a number of newly issued shares of the Company’s Class A common stock with a fair market value equal to the payout amount approved by the Human Capital and Compensation Committee of the board of directors for the applicable performance period.
As a result of the IPO, the Company is subject to Section 162(m) of the Internal Revenue Code in the U.S., which limits deductions related to compensation expenses of certain executive officers which were previously tax deductible as a private company. Accordingly, the Company’s annual effective tax rate will be impacted by the Section 162(m) limitations. In addition, in the second quarter of 2024 the Company will record a reduction to its previously established deferred tax assets of approximately $5 million, with a corresponding increase to income tax expense as a discrete item.
In connection with the IPO, the Human Capital and Compensation Committee granted equity awards with an aggregate value of $17 million to the Company’s executive team, including named executive officers, and other key employees under the 2024 LTIP. These awards consisted of 2,074,299 nonqualified stock options and 22,486 restricted stock units. The stock options, which expire ten years from the grant date, represent the right to purchase shares of the Company’s Class A common stock and are subject to continued employment through a three-year vesting period. The restricted stock units represent the right to receive shares of the Company’s Class A common stock and are subject to continued employment through a three-year ratable vesting period.
Under the 2024 LTIP, similar to prior long-term company compensation programs, equity awards are available to be issued to certain directors, officers and employees in order to attract, motivate and retain talent and to maximize their contribution to the long-term success of the Company. On May 1, 2024, the Human Capital and Compensation Committee granted annual equity awards to eligible employees and officers, including named executive officers. These awards include 711,256 restricted stock units with an aggregate value of $25 million and 382,455 performance share units with an aggregate value of $13 million. The restricted stock units represent the right to receive shares of the Company’s Class A common stock and are subject to continued employment through a three-year ratable vesting period. The performance share units represent the right to earn shares of the Company’s Class A common stock based on the achievement of certain performance conditions and are subject to continued employment through a three-year vesting period.
On May 1, 2024, the Company completed the sale of its payments testing business to an affiliate of Gallant Capital Partners for a base price of $30 million in cash, subject to customary post-closing adjustments. The divestiture will result in a pre-tax gain on sale of approximately $25 million, which will be recorded within other (expense) income, net in the second quarter of 2024.