Harman Kardon 2010 Annual Report Download - page 109

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
The weighted-average grant-date fair value of options granted during the years ended June 30, 2010, 2009
and 2008 was $12.82, $11.18 and $21.44, respectively. The total intrinsic value of options exercised during the
years ended June 30, 2010, 2009 and 2008 was $2.4 million, $0.4 million and $27.8 million, respectively.
Modification of Certain Stock Option Awards
Certain of 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, such award agreements
provide that the Compensation and Option Committee of our 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 years ended June 30, 2010 and 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 2010 and 2008, zero and $1.3 million, respectively 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, $1.4 million and $0.5 million for the
fiscal years ended June 30, 2010, 2009 and 2008, respectively.
Restricted Stock Awards
A summary of the status of our nonvested restricted stock awards as of June 30, 2010 and changes during
the year ended June 30, 2010 is presented as follows:
Shares
Weighted
Average
Grant-date
Fair Value
Nonvested at July 1, 2009 .......................... 86,992 $ 81.11
Granted .................................... — —
Vested ..................................... (26,992) 116.65
Forfeited ................................... — —
Nonvested at June 30, 2010 ........................ 60,000 65.13
As of June 30, 2010, there was $0.5 million of total unrecognized compensation cost related to nonvested
restricted stock-based compensation arrangements granted under the 2002 Plan. The weighted average
recognition period is 1.25 years.
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