Virgin Media 2008 Annual Report Download - page 131

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Note 10—Derivative Financial Instruments and Hedging Activities (Continued)
Currency Translation. Changes in fair value of these contracts are reported within foreign currency
transaction gains (losses).
The foreign exchange risks relating to the $550 million 9.125% senior notes due 2016, the
A225 million senior notes due 2014 and the $531.9 million and A423.9 million principal obligations
under the senior credit facility is being mitigated through the use of cross-currency interest rate swaps,
some of which qualify as accounting hedges and some of which do not.
Foreign Currency Forward Rate Contracts—Relating to the Purchase Price of Telewest Global, Inc.
These foreign currency forward rate and collar contracts were not accounted for as hedges under
FAS 133. As such, the contracts were carried at fair value in our consolidated balance sheet with
changes in the fair value recognized immediately in the consolidated statement of operations. Losses on
the settlement of these contracts totaling £101.0 million were reported within foreign currency
transactions gains (losses) in the consolidated statement of operations for the year ended December 31,
2006.
Note 11—Stock-Based Compensation Plans
At December 31, 2008, we had a number of stock-based compensation plans, which are described
below. In the years ended December 31, 2008 and December 31, 2007, the compensation cost that has
been charged against income for these plans was £16.8 million and £17.5 million, respectively. As a
result of the adoption of FAS 123R in 2006, we recorded a cumulative effect of a change in accounting
principle of £1.2 million to reduce compensation expense recognized in previous periods.
The Virgin Media Inc. Stock Incentive Plan is intended to encourage Virgin Media stock
ownership by employees, directors and independent contractors so that they may acquire or increase
their proprietary interest in our company, and to encourage such employees, directors and independent
contractors to remain in our employ or service and to put forth maximum efforts for the success of the
business. To accomplish such purposes, the plan provides that we may grant incentive stock options,
nonqualified stock options, restricted stock, restricted stock units and share awards.
Under the Virgin Media Inc. Stock Incentive Plan, options to purchase up to 29.0 million shares of
our common stock may be granted from time to time to certain of our employees and our subsidiaries.
Accordingly, we have reserved 29.0 million shares of common stock for issuance under the Virgin
Media Inc. Stock Incentive Plan.
Stock Option Grants
As a result of the reverse acquisition of Telewest as described in note 4, the outstanding options on
March 3, 2006 were converted into 2.5 options to purchase shares in the new parent company, with a
corresponding reduction in exercise price. Along with this, each outstanding option issued by Telewest
prior to the acquisition was converted into 0.89475 options to purchase shares in the new parent
company, with a corresponding adjustment in the exercise price in accordance with the terms of the
merger agreement.
All options have a 10 year term and vest and become fully exercisable within five years of
continued employment. We issue new shares upon exercise of the options. The fair value for these
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