Snapple 2012 Annual Report Download - page 109

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DR PEPPER SNAPPLE GROUP, INC.
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
91
Omnibus Stock Incentive Plan of 2008
In connection with the separation from Cadbury, on May 5, 2008, Cadbury Schweppes Limited, the Company's sole
stockholder, approved the Company's Omnibus Stock Incentive Plan of 2008 (the "2008 Stock Plan") and authorized up to
9,000,000 shares of the Company's common stock to be issued under the Stock Plan. Subsequent to May 7, 2008, the Compensation
Committee granted under the 2008 Stock Plan (a) options to purchase shares of the Company's common stock, which vest ratably
over three years commencing with the first anniversary date of the option grant, and (b) RSUs, with a substantial portion of RSUs
vesting over a three year period. Each RSU is to be settled for one share of the Company's common stock on the respective vesting
date of the RSU. The stock options issued under the 2008 Stock Plan have a maximum option term of 10 years.
STOCK OPTIONS
The tables below summarize information about the Company's stock options granted during the years ended December 31,
2012, 2011 and 2010.
The fair value of each stock option is estimated on the date of grant using the Black-Scholes option-pricing model. The risk-
free interest rate used in the option valuation model is based on zero-coupon yields implied by U.S. Treasury issues with remaining
terms similar to the expected term on the options. The expected term of the option represents the period of time that options granted
are expected to be outstanding and is derived by analyzing historic exercise behavior. Expected volatility is based on implied
volatilities from traded options on the Company's stock, historical volatility of the Company's stock and other factors. The
Company's expected dividend yield is based on historical dividends declared.
DPS is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures
differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and record stock-based
compensation expense only for those awards that are expected to vest.
The weighted average assumptions used to value grant options are detailed below:
For the Year Ended
December 31,
2012 2011 2010
Fair value of options at grant date $ 7.05 $ 6.59 $ 6.99
Risk free interest rate 0.87% 2.51% 2.65%
Expected term of options (in years) 5.1 6.0 6.0
Dividend yield 3.52% 2.75% 1.90%
Expected volatility 30.64% 22.70% 24.00%
The table below summarizes stock option activity for the year ended December 31, 2012:
Stock Options
Weighted
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic Value
(in millions)
Outstanding as of January 1, 2012 2,317,342 $ 28.25 8.04 $ 26
Granted 670,574 37.80
Exercised (973,565) 22.73 18
Forfeited or expired (12,443) 36.65
Outstanding as of December 31, 2012 2,001,908 34.07 7.95 20
Exercisable as of December 31, 2012 564,756 28.43 6.74 9
As of December 31, 2012, there were 1,969,144 stock options vested or expected to vest. The weighted average exercise price
of stock options granted for the years ended December 31, 2011 and 2010 was $36.42 and $32.36, respectively. As of December 31,
2012, there was $6 million of unrecognized compensation cost related to unvested stock options granted under the DPS Stock
Plans that is expected to be recognized over a weighted average period of 0.85 years.