Notes to Consolidated Financial Statements

Note 11 (1 of 3)

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.

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, therefore, 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.