Harman Kardon 2008 Annual Report Download - page 79

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61
A grant of restricted stock units involves an agreement by the Company to deliver a specified number of
shares of common stock or cash to the participant when the award vests. A participant has no ownership
or voting rights associated with the underlying shares of common stock. The Board may, at its discretion,
authorize the payment of dividend equivalents on the restricted stock units. At June 30, 2008, a total of
59,608 restricted stock units were outstanding, of which 25,000 share units were granted under the 2002
Plan and 34,608 share units were granted outside of the 2002 Plan.
Stock appreciation rights allow the holders to receive a predetermined percentage of the spread, not to
exceed 100 percent, between the option price and the fair market value of the shares on the date of
exercise. A performance unit is the equivalent of $100 and is awarded for the achievement of specified
management objectives as a condition to the payment of the award. The performance period will not be
less than three years. No stock appreciation right or performance unit grants have been made under the
2002 Plan.
We also have options outstanding under our 1992 Incentive Plan. Shares under the 1992 Incentive Plan
can be issued as original issuances or treasury shares or a combination of both. Options to purchase
314,024 shares with expiration dates ranging from November 10, 2008 to November 8, 2012 are
outstanding under our 1992 Incentive Plan. The 1992 Incentive Plan was approved by our stockholders
and had no shares available for grant on June 30, 2008.
Adoption of SFAS No. 123R
Effective July 1, 2005, we adopted SFAS No. 123R using the modified prospective method. Under SFAS
No. 123R, share-based compensation expense is recognized based on the estimated fair value of stock
options and similar equity instruments awarded to employees. The effect of adopting SFAS No. 123R was
not material to our net income for the year ended June 30, 2006, and the cumulative effect of adoption
using the modified-prospective method was similarly not material. Prior to fiscal 2006, we recorded
compensation expense associated with stock options in accordance with SFAS No. 123 since July 1,
2002. The primary impact of SFAS No. 123R was on our disclosures and certain calculations as we now
are required to use estimated forfeitures rather than actual forfeitures as we had prior to the adoption of
SFAS No. 123R.
Prior to the adoption of SFAS No. 123R, we presented all tax benefits of deductions resulting from the
exercise of stock options as operating cash flows in the consolidated statements of cash flows. SFAS No.
123R requires the cash flows related to tax benefits resulting from tax deductions in excess of the
compensation cost recognized for those options (excess tax benefits) to be classified as financing cash
flows. Accordingly, we have classified $5.3 million, $10.5 million and $45.5 million excess tax benefit
realized in the years ended June 30, 2008, 2007 and 2006, respectively, as cash flow from financing
activity in the accompanying consolidated statements of cash flows.