Harman Kardon 2011 Annual Report Download - page 97

Changes in the total amount of gross unrecognized tax benefits are as follows:
2011 2010
Balance at July 1 .......................................... $20,560 $14,001
Increases based on tax positions related to the current year ......... 7,702 455
(Decreases) increases identified during the current year related to
prior years ............................................. (204) 6,401
Reclassification ........................................... 3,444 0
Change due to foreign currency translation ..................... 764 (297)
Balance at June 30 ......................................... $32,266 $20,560
The unrecognized tax benefits at June 30, 2011 are permanent in nature and, if recognized, would reduce
our effective tax rate with the exception of $1.8 million of share-based compensation in Germany. We
periodically revaluate the recognition and measurement threshold of our uncertain tax positions based on new or
additional evidence such as tax authority administrative pronouncements, rulings and court decisions. The
ultimate settlement however, may be materially different from the amount accrued. Our significant jurisdictions
are Germany and the U.S. The tax years currently under examination by the German revenue authorities are
fiscal years 2005 through 2010 . The tax years currently under examination by the Internal Revenue Service
(“IRS”) are fiscal years 2006 and 2007. We have received some proposed changes by the IRS and although the
final resolution of the proposed adjustments is uncertain, we believe that the ultimate disposition of these matters
will not have a material adverse effect on our consolidated financial position, results of operations and cash
flows. While we expect the amount of unrecognized tax benefits to change, we are unable to quantify the change
at this time. It is reasonably possible that some of the unrecognized tax benefits in Germany will decrease within
12 months. The nature of the uncertainty is the share-based compensation in Germany. It is estimated that
$1.8 million of this share-based compensation will decrease within the next 12 months.
Of our unrecognized tax benefits, $17.9 million is included in Other non-current liabilities; $1.8 million is
included in Income taxes payable and $12.6 million has reduced our Deferred tax assets, long-term in our
Consolidated Balance Sheets at June 30, 2011.
We recognize interest and penalties related to unrecognized tax benefits in Income tax expense (benefit) in
our Consolidated Statements of Operations. As of June 30, 2011, the amount accrued for interest and penalties
was $1.0 million.
Note 14 – Shareholders’ Equity and Share-Based Compensation
Preferred Stock
As of June 30, 2011 and 2010, we had no shares of preferred stock outstanding. We are authorized to issue
5 million shares of preferred stock, $0.01 par value.
Common Stock
We have 200 million authorized shares of common stock, $0.01 par value. At June 30, 2011 and 2010, we
had 95,520,068 and 95,129,836 shares issued; 25,599,817 and 25,599,817 shares in treasury stock and
69,920,251 and 69,530,019 shares outstanding (net of treasury stock), respectively.
Issuance of Common Stock
On June 23, 2009, we completed a public offering of 10,667,000 shares of our common stock at the offering
price of $18.75 per share, less a 4.75 percent underwriting discount, and received cash proceeds of $189.8
million, net of expenses of $0.7 million. Approximately $0.1 million was recorded as an increase in our common
stock and $189.7 million was recorded as an increase in Additional paid-in capital in our Consolidated Balance
Sheet at June 30, 2009.
Share-Based Compensation
On June 30, 2011, we had one share-based plan with shares available for future grants, the Amended and
Restated 2002 Stock Option and Incentive Plan, as amended (the “2002 Plan”) which is described below. The
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