Hitachi 2006 Annual Report Download - page 83

Hitachi, Ltd. Annual Report 2007 81
The amount assigned to each major asset and liability caption of Clarion at the acquisition date is as follows:
Thousands of
Millions of yen U.S. dollars
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥83,414 $706,898
Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,558 428,458
Goodwill (not deductible for tax purposes) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,620 191,695
Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,063) (517,483)
Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,568) (326,847)
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,997) (101,670)
Net assets previously acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,444) (105,458)
Acquisition cost (including direct acquisition costs) . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,520) (275,593)
The results of operations of Clarion for the period from December 7, 2006 to March 31, 2007 are included in the
accompanying consolidated statements of operations. On a pro forma basis, revenue, net income and the per share
information of the Company, with assumed acquisition dates for Clarion of April 1, 2006 and 2005 would not differ materially
from the amounts reported in the accompanying consolidated financial statements as of and for the years ended March
31, 2007 and 2006.
On May 25, 2004, the Company signed a merger agreement with TOKICO LTD. (TOKICO) and Hitachi Unisia Automotive,
Ltd. and, on October 1, 2004, acquired full ownership of TOKICO by exchanging 0.521 of the Company’s treasury stock
for each of TOKICO’s common stocks outstanding. Before the transaction, the Company and certain subsidiaries had
owned approximately 42% of TOKICO, which had been accounted for under the equity method. The Company and
TOKICO obtained third party appraisals of the respective share prices which were used as a basis of negotiation over the
share exchange ratio. On October 1, 2004, the Company issued 33,937,141 shares of treasury stock, in the amount of
¥28,134 million calculated by using the quoted market price of ¥829 per share as of the announcement date, March 26,
2004, for the exchange with the TOKICO’s shareholders registered as of September 30, 2004. As a result, ¥12,509
million of gains on stock exchange upon the merger was credited to capital surplus.
TOKICO manufactures automotive components and pneumatic equipment. The Company has strategically targeted the
automotive products business and the purpose of the merger with TOKICO is to further expand this business.
The effects of the merger to the Company’s consolidated financial position were not material. On a pro forma basis,
revenue, net income and the per share information of the Company would not differ materially from the amounts reported
in the accompanying consolidated financial statements as of and for the year ended March 31, 2005.
29. STOCK OPTION PLANS
The Company and certain subsidiaries have stock option plans. Under the Company’s stock option plans, non-employee
directors, executive officers and certain employees have been granted stock options to purchase the Company’s common
stock. Under these stock option plans, options were granted at prices not less than market value at the date of grant and are
exercisable from one year after the date of grant and expire four years after the date of grant. The Company and certain
subsidiaries recognized no material stock-based compensation expense for the years ended March 31, 2007, 2006 and 2005.
The fair value of the Company’s stock options is estimated using the Black-Sholes option pricing model under the following
assumptions:
2006 2005
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37% 40%
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.6% 1.5–1.6%
Expected term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 years 4 years
Risk-free rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.26% 1.48–1.835%
Grant-date fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥172 ¥160–188