Harman Kardon 2010 Annual Report Download - page 110

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Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
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
fiscal years ended June 30, 2010, 2009 and 2008 there were 19,213, 28,106 and 2,770, respectively, of these
restricted stock units were settled at a cost of $0.8 million, $0.5 million and $0.1 million, respectively.
We granted 380,400 and 133,507 restricted stock units with performance conditions in the fiscal years ended
June 30, 2010 and 2009, respectively, under the 2002 Plan. The restricted stock units vest three years from the
date of grant based on attainment of certain performance targets in fiscal 2011. Compensation expense is
recognized ratably over the three-year vesting period based on grant date fair value and our assessment of the
probability that the performance targets will be met. We have recognized compensation expense based on our
estimate of the probability of achieving the targets.
For the years ended June 30, 2010 and 2009, we also granted 388,856 and 369,677 restricted stock units,
respectively, under the 2002 Plan that vest three years from the date of grant.
A summary of equity classified restricted stock unit activity as of and for the fiscal year ended June 30,
2010 is presented below:
Restricted
Stock Units
Non-vested at June 30, 2009 ................................. 506,064
Granted ............................................. 769,256
Vested .............................................. (96,575)
Forfeited ............................................ (48,522)
Non-vested at June 30, 2009 ................................. 1,130,223
At June 30, 2010 the aggregate intrinsic value of equity classified restricted stock units was $33.8 million. As
of June 30, 2010, there was $18.1 million of total unrecognized compensation cost related to equity classified
restricted stock unit compensation arrangements. The weighted average recognition period was 1.9 years.
Chief Executive Officer Special Enterprise Value Bonus
Our Chief Executive Officer (“CEO”) was granted a special bonus award in November 2007 (the “Special
Bonus Award”). The award was to be settled in cash based on a comparison of Harman’s enterprise value at
November 2012 to the enterprise value at the grant date in November 2007. This award is classified as a liability
in our Consolidated Balance Sheet at June 30, 2009. The fair value of the Special Bonus Award is required to be
measured each quarter using a Monte Carlo simulation model.
On September 1, 2009, pursuant to the terms of an amendment to the CEO’s employment letter agreement,
the Special Bonus Award was cancelled and replaced with the right to an annual equity award for fiscal years
2011 through 2013 (the “Annual Equity Grant”). On September 1, 2009, both time based vesting and
performance based vesting restricted stock units were granted to the CEO pursuant to the terms of the Annual
Equity Grant. The replacement of the Special Bonus Award with the awards granted pursuant to the Annual
Equity Grant was accounted for as a modification of an existing award. As a result of this modification, during
the first quarter of fiscal year 2010, approximately $0.5 million was reclassified from a liability to additional
paid-in capital in our Consolidated Balance Sheet and $0.5 million was recognized as compensation expense
within SG&A in our Consolidated Statement of Operations in the same reporting period and is therefore included
in our results for the year ended June 30, 2010.
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