Notes to Consolidated Financial Statements

NOTE 11 (1 OF 3)

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

 

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.