Snapple 2008 Annual Report Download - page 116

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Company’s consolidated financial statements will not be impacted by the Cadbury sponsored plans in future
periods.
The Company recognized the cost of all unvested employee stock-based compensation plans sponsored by
Cadbury on a straight-line attribution basis over the respective vesting periods, net of estimated forfeitures. Certain
of the plans sponsored by Cadbury contained inflation indexed earnings growth performance conditions.
SFAS 123(R) requires plans with such performance criteria to be accounted for under the liability method in
which a liability is recorded on the balance sheet. In addition, in calculating the income statement charge for share
awards under the liability method, the fair value of each award must be re-measured at each reporting date until
vesting, calculated by estimating the number of awards expected to vest for each plan, adjusted over the vesting
period.
The outstanding value of options recognized using the equity method has been reflected in Cadbury’s net
investment, a component of stockholders’ equity, while the options utilizing the liability method have been reflected
in accounts payable and accrued expenses and other non-current liabilities on the Consolidated Balance Sheet. The
Company did not receive cash in any year as a result of option exercises under share-based payment arrangements.
Actual tax benefits realized for the tax deductions from option exercises were $10 million and $5 million for 2007
and 2006, respectively. As of December 31, 2007, there was $6 million of total unrecognized before-tax
compensation cost related to nonvested stock-based compensation arrangements. The total intrinsic value of
options exercised during the year was $24 million and $13 million for 2007 and 2006, respectively. An expense was
recognized for the fair value at the date of grant of the estimated number of shares to be awarded to settle the awards
over the vesting period of each scheme.
The Company presents the tax benefits of deductions from the exercise of stock options as financing cash
inflows in the Consolidated Statements of Cash Flows.
Awards under the plans were settled by Cadbury, through either repurchases of publicly available shares, or
awards under the Bonus Share Retention Plan (“BSRP”) and the Long Term Incentive Plan (“LTIP”) were satisfied
by the transfer of shares to participants by the trustees of the Cadbury Schweppes Employee Trust (the “Employee
Trust”). The Employee Trust was a general discretionary trust whose beneficiaries included employees and former
employees of Cadbury and their dependents.
Prior to separation, the Company had a number of share option plans that were available to certain senior
executives, including the LTIP, BSRP and the Discretionary Share Option Plans (“DSOP”). Details of these plans,
which were sponsored by Cadbury prior to separation, are included below.
Long Term Incentive Plan
Certain senior executives of the Company were granted a conditional award of shares under the LTIP. This
award recognized the significant contribution they made to Cadbury shareowner value and was designed to
incentivize them to strive for sustainable long-term performance. In 2007, awards for the 2007-2009 performance
cycles were made to senior executives. Participants accumulated dividend equivalent payments both on the
conditional share awards (which will only be paid to the extent that the performance targets are achieved) and
during the deferral period. This part of the award was calculated as follows: number of shares vested multiplied by
aggregate of dividends paid in the performance period divided by the share price on the vesting date. The LTIP as of
December 31, 2007, had been in place since 1997. In 2004, the Compensation Committee of Cadbury (“the
Committee”) made a number of changes to the LTIP, and the table below sets forth its key features. As explained
below, from 2006, performance ranges for the growth in Underlying Earnings per Share (“UEPS”) are expressed in
absolute rather than post-inflation terms.
92
DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)