Sony 2005 Annual Report Download - page 115

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112 Sony Corporation
2003 2004 2005
Weighted- Weighted- Weighted- Weighted-
Number of average Number of average Number of average average
SARs exercise price SARs exercise price SARs exercise price exercise price
Years ended March 31 Yen Yen Yen Dollars
Outstanding at beginning of the fiscal year . . . . . . . .
2,410,394 ¥6,644 2,343,028 ¥6,341 1,526,568 ¥6,424 $60.04.
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,750 6,323 — — ———
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(11,800) 5,727 — — (241,134) 3,955 36.96.
Expired or forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
(84,316) 7,274 (816,460) 5,494 (420,350) 5,855 54.72.
Outstanding at end of the fiscal year . . . . . . . . . . . .
2,343,028 ¥6,341 1,526,568 ¥6,424 865,084 ¥7,436 $69.50.
Exercisable at end of the fiscal year . . . . . . . . . . . . .
2,176,319 ¥6,211 1,462,391 ¥6,421 856,156 ¥7,455 $69.67.
A summary of SARs outstanding and exercisable at March 31, 2005 is as follows:
Outstanding Exercisable
Weighted- Weighted- Weighted- Weighted- Weighted-
Number of average average average Number of average average
Exercise price range SARs exercise price exercise price remaining life SARs exercise price exercise price
Yen YenDollars Years Yen Dollars
¥03,234–05,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,850 ¥04,767 $044.55.6.77.61,850 ¥04,767 $044.55.
¥05,001–10,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749,109 7,365 68.83.1.08.740,181 7,386 69.03.
¥10,001–13,419 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,125 11,471 107.21.4.56.54,125 11,471 107.21.
¥03,234–13,419 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 865,084 ¥07,436 $069.50.1.70.856,156 ¥07,455 $069.67.
In accordance with APB No. 25 and its related interpretations,
the SARs compensation expense is measured as the excess of
the quoted market price of Sony Corporation’s common stock
over the SARs strike price, which is consistent with the account-
ing treatment prescribed for SAR plans in FAS No. 123. For the
year ended March 31, 2003, Sony recognized a reduction in
The weighted-average fair value per share at the date of grant
of common stock warrants, convertible bond options and stock
acquisition rights granted during the years ended March 31,
2003, 2004 and 2005 were ¥2,063, ¥1,413 and ¥1,085
($10.14), respectively. The fair value of common stock warrants,
convertible bond options and stock acquisition rights granted on
the date of grant, which is amortized to expense over the vest-
ing period in determining the pro forma impact, is estimated
using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
Years ended March 31 2003 2004 2005
Weighted-average
assumptions:
Risk-free interest rate . . .
2.76% 2.18% 2.04%
Expected lives . . . . . . . .
4.23 years 3.67 years 3.54 years
Expected volatility . . . . .
47.33% 42.83% 35.56%
Expected dividend . . . . .
0.47% 0.57% 0.62%
(4) SAR plan:
Sony granted stock appreciation rights (“SARs”) in Japan,
Europe and the United States of America for selected employ-
ees. Under the terms of these plans, employees on exercise
receive cash equal to the amount that the market price of Sony
Corporation’s common stock exceeds the strike price of the
SARs. The SARs generally vest ratably over a period of three
years, and are generally exercisable up to six to ten years from
the date of grant. Sony holds treasury stock for the SAR plan in
Japan to minimize cash flow exposure associated with the
SARs. In addition, Sony uses various strategies to minimize the
compensation expense associated with the SAR plans in the
United States of America and Europe.
The status of the SAR plans is summarized as follows:
SARs compensation expense of ¥670 million due to the decline
in Sony’s stock price during the year. For the year ended March
31, 2004, Sony recognized ¥105 million of SARs compensation
expense. For the year ended March 31, 2005, Sony recognized
a reduction in SARs compensation expense of ¥74 million ($1
million).
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