Sony 1999 Annual Report Download - page 69

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Sony Corporation Annual Report 1999
The amounts of statutory retained earnings of Sony
Corporation available for the payments of dividends to
stockholders as of March 31, 1998 and 1999 were
¥555,643 million and ¥610,133 million ($5,084,442
thousand), respectively. The appropriations of retained
earnings for the year ended March 31, 1999, which have
been incorporated in the accompanying consolidated
financial statements, will be proposed for approval at
the general stockholders’ meeting to be held on June
29, 1999 and will be recorded in the statutory books of
account, in accordance with the Japanese Commercial
Code, after stockholders’ approval. The above statutory
amounts available for dividend include cash dividends
for the six-month periods ended March 31, 1998 and
1999, respectively, which have been incorporated in the
accompanying consolidated financial statements.
Retained earnings include Sony’s equity in undistrib-
uted earnings of 20% to 50% owned companies ac-
counted for by the equity method in the amount of
¥18,566 million and ¥20,159 million ($167,992 thou-
sand) at March 31, 1998 and 1999, respectively.
The ordinary general meeting of stockholders held on
June 27, 1997 authorized Sony Corporation, pursuant to
the Japanese regulations, to acquire and retire up to a
total not exceeding 30 million outstanding shares of its
common stock with its profit, on and after June 28,
1997, whenever deemed necessary by the Board of Di-
rectors in view of general economic conditions, Sony’s
business performance and financial condition and other
factors. At March 31, 1999, no common stock had been
acquired under this authorization.
The ordinary general meeting of stockholders held
on June 26, 1998 approved that (a) in addition to the
shares discussed in the preceding paragraph, on and
after June 27, 1998, Sony Corporation may, by a reso-
lution of the Board of Directors, acquire and retire up
to a total not exceeding 30 million outstanding
shares of its common stock with its additional paid-in
capital at prices in total not exceeding ¥400 billion
($3,333,333 thousand) and (b) Sony Corporation may
grant share subscription rights to directors and/or
employees pursuant to the Japanese regulations. At
March 31, 1999, no common stock had been acquired
nor had any share subscription rights been granted
under this approval.
During the year ended March 31, 1998, Sony adopted
stock appreciation rights (SAR) plans in Japan and
Europe as incentive plans for selected employees. Sony
also adopted an SAR plan in the United States during
the year ended March 31, 1999. Under the terms of the
plans, the employees can receive cash equal to the amount
that the market price of Sony Corporation’s common
stock exceeds the strike price of the SAR. The SAR vest
ratably over a period of three years, and are generally
exercisable up to six years from the date of grant. Sony
holds treasury stock for the SAR plan in Japan to mini-
mize cash flow exposure associated with the SAR. The
status of the SAR plans is summarized as follows:
Yen Dollars
Number of Weighted-average
shares exercise price
Outstanding as of March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,200 ¥12,211 $101.76
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Expired or forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —
Outstanding as of March 31, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 242,200 12,211 101.76
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862,925 10,467 87.23
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ———
Expired or forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,750) 10,550 87.92
Outstanding as of March 31, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,095,375 10,852 90.43
None of these shares was exercisable as of March 31,
1999. At March 31, 1999 the weighted-average remain-
ing contractual life of SAR outstanding was 5.1 years
and the range of exercise prices was ¥7,263 ($60.53) to
¥12,285 ($102.38) per share. In accordance with
Accounting Principles Board Opinion No. 25, “Account-
ing for Stock Issued to Employees” and its related inter-
pretations, SAR compensation expense is measured as the
excess of the quoted market price of Sony Corporation’s
common stock over the SAR strike price. Sony uses
various strategies to minimize the compensation expense
associated with the SAR in the United States and Europe.
Gains and losses relating to those strategies are recog-
nized as SAR compensation expense. For the years ended
March 31, 1998 and 1999, Sony recognized ¥0 million
and ¥886 million ($7,383 thousand) of SAR
compensation expense, respectively.