Mondelez 2012 Annual Report Download - page 91

Table of Contents
The net cash settlement for the awards Kraft Foods Group and our employees received was determined as follows:
The cash settlements resulted in our recording a receivable of $55 million due from Kraft Foods Group as of December 31, 2012.
Payment is subject to the completion of final reviews and other administrative procedures.
Stock Options:
Stock options are granted at an exercise price equal to the market value of the underlying stock on the grant date, generally
become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of
ten years.
We account for our employee stock options under the fair value method of accounting using a modified Black-
Scholes methodology
to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to
expense over the vesting period. We recorded compensation expense related to stock options held by our employees of $39 million
in 2012, $35 million in 2011 and $33 million in 2010 in our results from continuing operations. The deferred tax benefit recorded
related to this compensation expense was $11 million in 2012, $10 million in 2011 and $10 million in 2010. The unamortized
compensation expense related to our employee stock options was $43 million at December 31, 2012 and is expected to be
recognized over a weighted-average period of 2 years.
Our weighted-average Black-Scholes fair value assumptions were:
The risk-free interest rate represents the constant maturity U.S. government treasuries rate with a remaining term equal to the
expected life of the options. The expected life is the period over which our employees are expected to hold their options. Volatility
reflects historical movements in our stock price for a period commensurate with the expected life of the options. The 2012 Dividend
yield reflects the dividend yield in place at the time of the historical grants and will reflect a lower dividend yield for Mondelēz
International for grants made following the Spin-Off of Kraft Foods Group.
Stock option activity for the year ended December 31, 2012 is reflected below. As a result of the Spin-Off, there was no impact on
the number of common shares underlying our stock options. For stock options granted prior to the Spin-Off, the weighted-average
exercise prices in the table below reflect the historical exercise prices. An adjustment was made as of October 1, 2012 to convert
the exercise prices on the exercisable stock options outstanding due to the Spin-Off.
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• Stock options : To the extent that our employees received Kraft Foods Group stock options, we plan to reimburse Kraft
Foods Group in cash for the fair value of the stock options received. To the extent that Kraft Foods Group employees
held our stock options, Kraft Foods Group plans to reimburse us in cash for the fair value of the stock options.
• Restricted and deferred stock : To the extent that our employees received Kraft Foods Group restricted and deferred
stock, we plan to reimburse Kraft Foods Group for the fair value of the shares received less the value of projected
forfeitures. To the extent that Kraft Foods Group employees held restricted and deferred stock, Kraft Foods Group plans
to reimburse us in cash for the fair value of the restricted and deferred stock less the value of projected forfeitures.
Risk
-
Free
Interest Rate
Expected Life
Expected
Volatility
Expected
Dividend
Yield
Fair Value
at Grant Date
2012
1.16%
6 years
20.13%
3.08%
$
4.78
2011
2.34%
6 years
18.92%
3.72%
$
3.84
2010
2.82%
6 years
19.86%
4.14%
$
3.69
Shares Subject
to Option
Weighted
-
Average
Exercise Price
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Balance at January 1, 2012
49,598,867
$
28.87
Options granted
13,512,839
37.97
Options exercised
(8,168,062
)
26.39
Options cancelled
(2,440,601
)
30.20
Adjustment due to the Spin-Off
249,996
19.59
Balance at December 31, 2012
52,753,039
20.45
7 years
$264 million
Exercisable at December 31, 2012
25,239,082
18.32
6 years
$180 million
(1) Due to restrictions stemming from local laws, taxes or other regulatory matters, certain employees who previously held stock options may no longer hold
stock options from Kraft Foods Group. As such, their stock option awards were converted into an equivalent amount of additional Mondelēz International
stock options in order to preserve the fair value of the overall stock option awards granted.
(1)