Sprint - Nextel 2011 Annual Report Download - page 98

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
individuals as defined by the plan. Options, other than those issued through the offer to exchange ("Exchange Offer") described below, are generally granted with an
exercise price equal to the market value of the underlying shares on the grant date, generally vest on an annual basis over three or four years, and generally have a
contractual term of ten years. Restricted stock units generally have performance and service requirements or service requirements only with vesting periods ranging from
one to three years. Performance-based restricted stock units awarded in 2011 and 2010 have three distinct one-year performance periods and are granted in each period
once the performance objectives are established, usually during the first quarter of each calendar year. Employees and directors who are granted restricted stock units are
not required to pay for the shares but generally must remain employed with us, or continue to serve as a member of our board of directors, until the restrictions lapse,
which is typically three years for employees and one year for directors. The Compensation Committee of our board of directors, or one or more executive officers should
the Compensation Committee so authorize, as provided in the 2007 Plan, will determine the terms of each share and non-share based award. No new grants can be made
under the 1997 Program, the Nextel Plan or the MISOP.
During 2011, the number of shares available and reserved for future grants under the 2007 Plan totaled approximately 165 million common shares. The
number of shares available under the 2007 Plan includes any shares originally granted under the 1997 Program, the Nextel Plan or the MISOP that are forfeited, expired,
or otherwise terminated, which totaled approximately 10 million shares in 2011. As of December 31, 2011, restricted stock units and options to acquire about 56 million
shares were outstanding under the 2007 Plan, restricted stock units and options to acquire about 9 million shares were outstanding under the 1997 Program, options to
acquire about 3 million shares were outstanding under the Nextel Plan and options to acquire about 5 million common shares were outstanding under the MISOP.
Under our ESPP, eligible employees may subscribe quarterly to purchase shares of our Series 1 common stock through payroll deductions of up to 20% of
eligible compensation. Effective April 1, 2009 the purchase price is equal to 95% of the market value on the last trading day of each quarterly offering period, modified
from 90% of the market value in previous periods. The aggregate number of shares purchased by an employee may not exceed 9,000 shares or $25,000 of fair market
value in any calendar year, subject to limitations imposed by the Internal Revenue Code. As of December 31, 2011, the ESPP has approximately 77 million common
shares authorized and reserved for future purchases, which is net of elections made by employees participating in the fourth quarter 2011 offering period under the ESPP
to purchase about 1.5 million of our common shares, which were issued in the first quarter 2012. Employees purchased these shares for $2.21 per share.
Currently, we use new shares to satisfy share-based awards or treasury shares, if available.
Compensation Costs
The cost of employee services received in exchange for share-based awards classified as equity is measured using the estimated fair value of the award on the
date of the grant, and that cost is recognized over the period that the award recipient is required to provide service in exchange for the award. Awards of instruments
classified as liabilities are measured at the estimated fair value at each reporting date through settlement. Share-based compensation cost related to awards with graded
vesting is recognized using the straight-line method.
Pre-tax share and non-share based compensation charges from our incentive plans included in net loss were $73 million for 2011, $70 million for 2010, and
$81 million for 2009. The net income tax benefit (expense) recognized in the consolidated financial statements for share-based compensation awards was $13 million for
2011, $(18) million for 2010, and $(3) million for 2009.
As of December 31, 2011, there was $42 million of total unrecognized compensation cost related to non-vested incentive awards that are expected to be
recognized over a weighted average period of 1.60 years. Cash received from exercise under all share-based payment arrangements, net of shares surrendered for
employee tax obligations, was $9 million for 2011, $7 million for 2010, and insignificant for 2009.
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