Coca Cola 2010 Annual Report Download - page 128

restricted stock to be released. For performance share units granted before 2008, this holding period is generally two
years. For performance share units granted in 2008 and beyond, this holding period is generally one year. Restrictions
on such stock generally lapse at the end of the holding period. Performance share units generally do not pay dividends
or allow voting rights during the performance period. Participants generally only receive dividends or dividend
equivalents once the performance criteria have been certified and the restricted stock or restricted stock units have
been issued. Accordingly, the fair value of these units is the quoted market value of the Company stock on the grant
date less the present value of the expected dividends not received during the performance period. In the period it
becomes probable that the performance criteria specified in the plan will be achieved, we recognize expense for the
proportionate share of the total fair value of the performance share units related to the vesting period that has already
lapsed. The remaining cost of the grant is expensed on a straight-line basis over the balance of the vesting period.
Performance share units under The Coca-Cola Company 1989 Restricted Stock Award Plan require achievement of
certain financial measures, primarily compound annual growth in earnings per share or economic profit. These financial
measures are adjusted for certain items approved and certified by the Audit Committee of the Board of Directors. The
purpose of these adjustments is to ensure a consistent year to year comparison of the specific performance criteria.
Economic profit is our net operating profit after tax less the cost of the capital used in our business. In the event that
the financial result equals the predefined target, the Company will grant the number of restricted shares equal to the
target award in the underlying performance share unit agreements. In the event the financial result exceeds the
predefined target, additional shares up to the maximum award may be granted. In the event the financial result falls
below the predefined target, a reduced number of shares may be granted. If the financial result falls below the
threshold award performance level, no shares will be granted. Performance share units are generally settled in stock,
except for certain circumstances such as death or disability, where former employees or their beneficiaries are provided
a cash equivalent payment. As of December 31, 2010, performance share units of approximately 2,414,000 and 2,840,000
were outstanding for the 2008-2010 and 2010-2012 performance periods, respectively.
The following table summarizes information about performance share units based on the target award amounts in the
performance share unit agreements:
Weighted-Average
Share Units Grant-Date
(In thousands) Fair Value
Outstanding on January 1, 2010 3,471 $ 50.78
Granted 2,922 50.33
Conversions:
Restricted stock1(461) 44.62
Restricted stock units2(368) 41.77
Paid in cash equivalent (14) 44.74
Canceled/forfeited (296) 53.01
Outstanding on December 31, 201035,254 $ 51.60
1Represents performance share units converted to restricted stock based on the certification of financial results for the 2007-2009
performance period. The vesting of this restricted stock is subject to terms of the performance share unit agreements.
2Represents performance share units converted to restricted stock units for executives based on the certification of financial results
for the 2007-2009 performance period and 72,000 shares related to a grant in 2004 that contained predefined qualitative
performance criteria and release criteria that differ from the other programs described above. These awards are similar to restricted
stock, including payment of dividend equivalents, but were granted in this manner because the executives were based outside the
United States. The vesting of restricted stock units is subject to terms of the performance share unit agreements.
3The outstanding performance share units as of December 31, 2010, at the threshold award and maximum award levels were
2.6 million and 7.9 million, respectively.
The Company converted performance share units of 13,825 in 2010, 20,958 in 2009 and 56,642 in 2008 to cash
equivalent payments of approximately $0.7 million, $1.1 million and $3.3 million, respectively, to former executives who
were ineligible for restricted stock grants due to certain events such as death, disability or termination.
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