Verizon Wireless 2010 Annual Report Download - page 62

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NOTE 11
STOCKBASED COMPENSATION
Verizon Communications Long-Term Incentive Plan
The 2009 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, performance
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 granted prior
to January 1, 2010 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 common stock. The RSUs granted
subsequent to January 1, 2010 are classified as equity awards because
these 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.
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 goal has 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, there-
fore, 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 proportion as the PSU award.
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, 2008 21,573 32,135
Granted 7,277 11,194
Payments (6,869) (7,597)
Cancelled/Forfeited (161) (2,518)
Outstanding December 31, 2008 21,820 33,214
Granted 7,101 14,079
Payments (9,357) (17,141)
Cancelled/Forfeited (121) (257)
Outstanding December 31, 2009 19,443 29,895
Granted 8,422 17,311
Payments (6,788) (14,364)
Cancelled/Forfeited (154) (462)
Outstanding December 31, 2010 20,923 32,380
As of December 31, 2010, 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 a weighted-average
period of approximately two years.
The RSUs granted in 2010, and classified as equity awards, have a weighted
average grant date fair value of $28.63. During 2010, 2009 and 2008, we
paid $0.7 billion, $0.9 billion and $0.6 billion, respectively, to settle RSUs
and PSUs classified as liability awards.
Verizon Wireless’ Long-Term Incentive Plan
The 2000 Verizon Wireless Long-Term Incentive Plan (the Wireless Plan)
provides compensation opportunities to eligible employees 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, 2010, all VARs were fully vested. We have not granted
new VARs since 2004.
VARs reflect the change in the value of the Partnership, as defined in the
Wireless Plan. Similar to stock options, the valuation is determined using a
Black-Scholes model. 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 exer-
cise, less applicable taxes. VARs are fully exercisable 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.