Sony 2006 Annual Report Download - page 123

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121
A summary of stock acquisition rights outstanding and exercisable at March 31, 2006 is as follows:
Outstanding Exercisable
Weighted-
Number of Weighted-average average Number of Weighted-average
Exercise price range shares exercise price remaining life shares exercise price
Yen YenDollars Years Yen Dollars
¥3,782–5,396 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,100,700 ¥4,351 $37.19 8.38 3,136,200 ¥4,629 $39.56
As the exercise prices for the warrant, convertible bond and
stock acquisition rights plans were determined based on the
prevailing market price shortly before the date of grant, the
compensation expense for these plans was not significant for
the fiscal years ended March 31, 2004, 2005 and 2006.
As discussed in Notes 2 and 16, all shares of subsidiary track-
ing stock were converted to shares of Sony common stock on
December 1, 2005. As a result of the conversion, all subsidiary
tracking stock warrants and acquisition rights were converted to
Sony common stock warrants and acquisition rights. In addition
to the above tables, 166,643 shares were issued by the exercise
of those warrants and acquisition rights. At March 31, 2006,
there were no common stock warrants and acquisition rights
outstanding which were granted by the conversion.
As a result of the establishment of the joint venture between
Sony’s recorded music business with the recorded music busi-
ness of Bertelsmann AG (Note 6), employees of Sony’s recorded
music business who were granted options under the convertible
bond and stock acquisition rights plans prior to the establish-
ment of the joint venture are no longer considered employees of
Sony under FAS No. 123 as these individual are now employees
of SONY BMG which is accounted for under the equity method.
As a result, a compensation charge of ¥340 million was recorded
in the fiscal year ended March 31, 2005 based on the fair value
method of accounting for stock-based compensation using the
Black-Scholes option-pricing model.
The weighted-average fair value per share at the date of grant
of stock acquisition rights granted during the fiscal years ended
March 31, 2004, 2005 and 2006 were ¥1,413, ¥1,085 and
¥1,585 ($13.55), respectively. The fair value of stock acquisition
rights granted on the date of grant, which is amortized to ex-
pense over the vesting 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 2004 2005 2006
Weighted-average
assumptions:
Risk-free interest rate . . . .
2.18% 2.04% 2.90%
Expected lives . . . . . . . . .
3.67 years 3.54 years 6.14 years
Expected volatility . . . . . .
42.83% 35.56% 39.50%
Expected dividend . . . . . . .
0.57% 0.62% 0.61%
(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 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:
2004 2005 2006
Weighted- Weighted-
Number of average Number of average Number of Weighted-average
SARs exercise price SARs exercise price SARs exercise price
Years ended March 31 Yen Yen Yen Dollars
Outstanding at beginning of the fiscal year . . . . . . . .
2,343,028 ¥6,341 1,526,568 ¥6,424 865,084 ¥7,436 $63.56.
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
——(241,134) 3,955 (50,000) 5,020 42.91.
Expired or forfeited . . . . . . . . . . . . . . . . . . . . . . . . .
(816,460) 5,494 (420,350) 5,855 (628,584) 7,338 62.72.
Outstanding at end of the fiscal year . . . . . . . . . . . .
1,526,568 ¥6,424 865,084 ¥7,436 186,500 ¥9,211 $78.73.
Exercisable at end of the fiscal year . . . . . . . . . . . . .
1,462,391 ¥6,421 856,156 ¥7,455 186,500 ¥9,211 $78.73.
There were no SARs granted during the fiscal years ended March 31, 2004, 2005 and 2006. All SARs were exercisable as of
March 31, 2006.