Verizon Wireless 2009 Annual Report Download - page 62

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NOTE 11
STOCKBASED COMPENSATION
Verizon Communications Long-Term Incentive Plan
In May 2009, Verizon shareholders approved the 2009 Verizon
Communications Inc. Long-Term Incentive Plan (the Plan) which permits
the granting of stock options, stock appreciation rights, restricted stock,
restricted stock units, performance shares, performance stock units and
other awards. The maximum number of shares available for awards from
the Plan is 115 million shares. The Plan amends and restates the previous
long-term incentive plan.
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
liability awards because the RSUs will be paid in cash upon vesting. The
RSU award liability is measured at its fair value at the end of each reporting
period and, therefore, will fluctuate based on the performance of Verizon’s
stock. 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.
The following table summarizes Verizon’s Restricted Stock Unit activity:
(shares in thousands)
Restricted
Stock Units
Weighted-
Average
Grant-Date
Fair Value
Outstanding, January 1, 2007 15,593 $ 33.67
Granted 6,779 37.59
Payments (602) 36.75
Cancelled/Forfeited (197) 34.81
Outstanding December 31, 2007 21,573 34.80
Granted 7,277 36.64
Payments (6,869) 36.06
Cancelled/Forfeited (161) 35.45
Outstanding December 31, 2008 21,820 35.01
Granted 7,101 31.90
Payments (9,357) 31.65
Cancelled/Forfeited (121) 35.43
Outstanding December 31, 2009 19,443 35.50
Notes to Consolidated Financial Statements continued
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 goals have been achieved over the three-
year performance cycle. All payments are subject to approval by the
Human Resources Committee. 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’s 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 proportion as the PSU award.
The following table summarizes Verizon’s Performance Stock Unit
activity:
(shares in thousands)
Performance
Stock Units
Weighted-
Average
Grant-Date
Fair Value
Outstanding, January 1, 2007 28,423 $ 34.22
Granted 10,371 37.59
Payments (5,759) 36.75
Cancelled/Forfeited (900) 36.18
Outstanding December 31, 2007 32,135 34.80
Granted 11,194 36.64
Payments (7,597) 36.06
Cancelled/Forfeited (2,518) 36.00
Outstanding December 31, 2008 33,214 35.04
Granted 14,079 31.84
Payments (17,141) 31.58
Cancelled/Forfeited (257) 34.32
Outstanding December 31, 2009 29,895 35.52
As of December 31, 2009, unrecognized compensation expense related
to the unvested portion of Verizon’s RSUs and PSUs was approximately
$304 million and is expected to be recognized over a weighted-average
period of approximately two years.
Verizon Wireless’s Long-Term Incentive Plan
The 2000 Verizon Wireless Long-Term Incentive Plan (the Wireless Plan)
provides compensation opportunities to eligible employees and other
participating affiliates of Verizon Wireless (the Partnership). The Wireless
Plan provides rewards that are tied to the long-term performance of the
Partnership. Under the Wireless Plan, Value Appreciation Rights (VARs)
were granted to eligible employees. As of December 31, 2009, all VARs
were fully vested.
VARs reflect the change in the value of the Partnership, as defined in
the Wireless Plan, similar to stock options. Once VARs become vested,
employees can exercise their VARs and receive a payment that is equal to
the difference between the VAR price on the date of grant and the VAR
price on the date of exercise, less applicable taxes. VARs are fully exercis-
able three years from the date of grant, with a maximum term of 10 years.
All VARs were granted at a price equal to the estimated fair value of the
Partnership, as defined in the Wireless Plan, at the date of the grant.