Harman Kardon 2009 Annual Report Download - page 100

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
Modification of Certain Stock Option Awards
The award agreements under the 2002 Plan state that vested options not exercised are forfeited upon
termination of employment for any reason other than death or disability. However, the award agreements provide
that the Compensation and Option Committee of the Board of Directors may extend the time period to exercise
vested options 90 days beyond the employment termination date for certain employees. During fiscal year 2009,
no extensions were granted. During the fiscal year ended June 30, 2008, the Compensation and Option
Committee used this authority. This action represented a modification of the terms or conditions of an equity
award and therefore was accounted for as an exchange of the original award for a new award. During fiscal year
2008, $1.3 million of incremental share-based compensation cost was recognized for the excess of the fair value
of the new award over the fair value of the original award immediately before the terms were modified.
Grant of Stock Options with Market Conditions
We granted 330,470 stock options containing a market condition to employees on March 21, 2008. The
options vest three years from the date of grant based on a comparison of our total shareholder return (“TSR”) to a
selected peer group of publicly listed multinational companies. TSR will be measured as the annualized increase
in the aggregate value of a company’s stock price plus the value of dividends, assumed to be reinvested into
shares of the company’s stock at the time of dividend payment. The base price to be used for the TSR calculation
of $42.19 was the 20-day trading average from February 6, 2008 through March 6, 2008. The ending price to be
used for the TSR calculation will be the 20-day trading average prior to and through March 6, 2011. The grant
date fair value of $4.2 million was calculated using a combination of Monte Carlo simulation and lattice-based
models. Share-based compensation expense for this grant was $1.4 million and $0.5 million for the fiscal year
ended June 30, 2009 and 2008, respectively.
Restricted Stock Awards
A summary of the status of our nonvested restricted stock awards as of June 30, 2009 and changes during
the year ended June 30, 2009 is presented as follows:
Shares
Weighted
Average
Grant-date
Fair Value
Nonvested at July 1, 2008 .................................. 92,910 $95.23
Granted ............................................ 20,000 20.53
Vested ............................................. (25,918) 84.98
Forfeited ............................................ — —
Nonvested at June 30, 2009 ................................. 86,992 81.11
As of June 30, 2009, there was $2.6 million of total unrecognized compensation cost related to nonvested
restricted stock-based compensation arrangements granted under the plan. The weighted average recognition
period is 1.53 years.
Restricted Stock Units
In January and September 2008, we granted 34,608 and 28,344 cash-settled restricted stock units,
respectively, outside the 2002 Plan. These restricted stock units are accounted for as liability awards and are
recorded at the fair value at the end of the reporting period in accordance with their vesting schedules. During the
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