Verizon Wireless 2011 Annual Report Download - page 70

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68
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, 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 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. The Human
Resources Committee of the Board of Directors determines the number
of PSUs a participant earns based on the extent to which the corre-
sponding goal has 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 rela-
tive 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.
nOtEs tO cOnsOlidatEd Financial statEMEnts continued
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, 2009 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
Granted 6,667 10,348
Payments (7,600) (12,137)
Cancelled/Forfeited (154) (2,977)
Outstanding December 31, 2011 19,836 27,614
As of December 31, 2011, unrecognized compensation expense related to
the unvested portion of Verizon’s RSUs and PSUs was approximately $0.4
billion and is expected to be recognized over approximately two years.
The RSUs granted in 2011 and 2010, and classified as equity awards, have
weighted average grant date fair values of $36.38 and $28.63 per unit,
respectively. During 2011, 2010 and 2009, we paid $0.7 billion, $0.7 bil-
lion and $0.9 billion, respectively, 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) provides
compensation opportunities to eligible employees of Verizon Wireless
(the Partnership). Under the Wireless Plan, Value Appreciation Rights
(VARs) were granted to eligible employees. As of December 31, 2011, 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. All outstanding VARs are fully exercisable and
have 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.