America Online 2015 Annual Report Download - page 66

approach techniques as part of the analysis. The fair value measure-
ment was categorized as Level 3, as significant unobservable inputs
were used in the valuation. The expected disposal losses, which rep-
resented the difference between the fair value less cost to sell and the
carrying amount of the assets held for sale, were included in Selling,
general and administrative expenses.
Note10
Stock-Based Compensation
Verizon Communications Long-Term Incentive Plan
The Verizon Communications Inc. Long-Term Incentive Plan (the
Plan) permits the granting of stock options, stock appreciation rights,
restricted stock, restricted stock units, performance shares, perfor-
mance stock units and other awards. The maximum number of shares
available for awards from the Plan is 119.6million shares.
Restricted Stock Units
The Plan provides for grants of Restricted Stock Units (RSUs) that
generally vest at the end of the third year after the grant. The RSUs are
classified as equity awards because the RSUs will be paid in Verizon
common stock upon vesting. The RSU equity awards are measured
using the grant date fair value of Verizon common stock and are not
remeasured at the end of each reporting period. Dividend equivalent
units are also paid to participants at the time the RSU award is paid,
and in the same proportion as the RSU award.
Performance Stock Units
The Plan also provides for grants of Performance Stock Units (PSUs)
that generally vest at the end of the third year after the grant. As
defined by the Plan, the Human Resources Committee of the Board of
Directors determines the number of PSUs a participant earns based
on the extent to which the corresponding performance goals have
been achieved over the three-year performance cycle. The PSUs are
classified as liability awards because the PSU awards are paid in cash
upon vesting. The PSU award liability is measured at its fair value at the
end of each reporting period and, therefore, will fluctuate based on the
price of Verizon common stock as well as performance relative to the
targets. Dividend equivalent units are also paid to participants at the
time that the PSU award is determined and paid, and in the same pro-
portion as the PSU award. The granted and cancelled activity for the
PSU award includes adjustments for the performance goals achieved.
The following table summarizes Verizon’s Restricted Stock Unit and
Performance Stock Unit activity:
(shares in thousands)
Restricted
Stock Units
Performance
Stock Units
Outstanding January1, 2013 18,669 39,463
Granted 4,950 7,470
Payments (7,246) (22,703)
Cancelled/Forfeited (180) (506)
Outstanding December31, 2013 16,193 23,724
Granted 5,278 7,359
Payments (6,202) (9,153)
Cancelled/Forfeited (262) (1,964)
Outstanding December31, 2014 15,007 19,966
Granted 4,958 7,044
Payments (5,911) (6,732)
Cancelled/Forfeited (151) (3,075)
Outstanding December31, 2015 13,903 17,203
As of December31, 2015, unrecognized compensation expense
related to the unvested portion of Verizon’s RSUs and PSUs was
approximately $0.3billion and is expected to be recognized over
approximately two years.
The RSUs granted in 2015 and 2014 have weighted- average grant date
fair values of $48.15 and $47.23 per unit, respectively. During 2015,
2014 and 2013, we paid $0.4billion, $0.6billion and $1.1billion, respec-
tively, to settle RSUs and PSUs classified as liability awards.
Verizon Wireless’ Long-Term Incentive Plan
The Verizon Wireless Long-Term Incentive Plan (the Wireless Plan)
provided compensation opportunities to eligible employees of
Verizon Wireless (the Partnership). Under the Wireless Plan, Value
Appreciation Rights (VARs) were granted to eligible employees. We
have not granted new VARs since 2004. As of December31, 2015,
there are no VARs that remain outstanding.
Stock-Based Compensation Expense
After-tax compensation expense for stock-based compensation
related to RSUs, PSUs and VARs described above included in Net
income attributable to Verizon was $0.3billion, $0.3billion and
$0.4billion for 2015, 2014 and 2013, respectively.
Stock Options
The Plan provides for grants of stock options to participants at an
option price per share of no less than 100% of the fair market value
of Verizon common stock on the date of grant. Each grant has a
10-year life, vesting equally over a three-year period, starting at the
date of the grant. We have not granted new stock options since 2004.
As of December31, 2015, there are no stock options that remain
outstanding.
Note11
Employee Benefits
We maintain non- contributory defined benefit pension plans for many
of our employees. In addition, we maintain postretirement health care
and life insurance plans for our retirees and their dependents, which
are both contributory and non- contributory, and include a limit on our
share of the cost for certain recent and future retirees. In accordance
with our accounting policy for pension and other postretirement
benefits, operating expenses include pension and benefit related
credits and/or charges based on actuarial assumptions, including
projected discount rates and an estimated return on plan assets.
These estimates are updated in the fourth quarter to reflect actual
return on plan assets and updated actuarial assumptions. The adjust-
ment is recognized in the income statement during the fourth quarter
or upon a remeasurement event pursuant to our accounting policy for
the recognition of actuarial gains and losses.
Pension and Other Postretirement Benefits
Pension and other postretirement benefits for many of our employees
are subject to collective bargaining agreements. Modifications in
benefits have been bargained from time to time, and we may also peri-
odically amend the benefits in the management plans. The following
tables summarize benefit costs, as well as the benefit obligations, plan
assets, funded status and rate assumptions associated with pension
and postretirement health care and life insurance benefit plans.
64 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued