Harman Kardon 2011 Annual Report Download - page 100

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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 vested on March 21, 2011, which was three years from the date of grant. The value of the options was
based on a comparison of our total shareholder return (“TSR”) to a selected peer group of publicly listed
multinational companies. TSR was 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 used for the TSR calculation was $42.19 which was the 20-day trading
average from February 6, 2008 through March 6, 2008. The ending price used for the TSR calculation was 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 income of $1.5 million and expense of $1.4 million and $1.4 million for the fiscal
years ended June 30, 2011, 2010 and 2009, respectively. A net benefit was recognized in the fiscal year ended
June 30, 2011 due to forfeitures for employees who did not meet the service requirements and therefore did not
vest in the options.
Restricted Stock Awards
A summary of the status of our nonvested restricted stock awards as of June 30, 2011 and changes during
the fiscal year ended June 30, 2011 is presented as follows:
Shares
Weighted
Average
Grant-date
Fair Value
Nonvested at June 30, 2010 ........................ 60,000 $65.13
Granted .................................... 0 0
Vested ..................................... (34,000) 82.27
Forfeited ................................... 0 0
Nonvested at June 30, 2011 ........................ 26,000 42.71
As of June 30, 2011, there was $0.1 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 0.6 years.
Restricted Stock Units
We granted 191,721 restricted stock units with performance conditions and 191,715 restricted stock units
with market conditions, in the fiscal year ended June 30, 2011, under the 2002 Plan. These restricted stock units
with performance conditions cliff vest three years from the date of grant based on the attainment of certain
performance conditions in fiscal year 2013. The restricted stock units with market conditions cliff vest three
years from the date of grant based on a comparison of our total TSR to the TSR of a selected peer group of
publicly listed multinational companies. The grant date fair value of $5.2 million was calculated using a Monte
Carlo simulation model. Compensation expense, for both the restricted stock units with performance conditions
and the restricted stock units with market conditions, is recognized ratably over the three-year vesting period
based on the grant date fair value and our assessment of the probability that the applicable targets will be met.
The probability is reassessed each reporting period for the restricted stock units with performance conditions.
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 year 2012 and 2011,
respectively. 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.
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