PDF, 3.2 MB - Pfleiderer AG

20. Derivative financial
instruments
As permissible under SFAS 123, the Company records the stock options using the intrinsic value
based method from APB 25 (Accounting for Stock Issued to Employees). All options were issued
at an exercise price in excess of the market price as of the issue date. The Company accordingly
did not report any personnel expenses in connection with these subscription rights.
SFAS 123 requires the disclosure of adjusted pro-forma information on the Group’s net income
for the year, reported as if the Company had accounted for the employees’ subscription rights
applying the fair value method. The fair value of these subscription rights granted for the 2001,
2002 and 2004 plans was estimated as of the date on which they were granted using the Black-
Scholes method based on the following assumed weighted averages: risk-free interest rate of
4.7 percent for 2001, 4.4 percent for 2002 and 3.4 percent for 2004; volatility of 42.0 percent
for 2001, 54.8 percent for 2002 and 48.6 percent for 2004, expected dividend yield as of the
valuation date of 2 percent for 2001, 2002 and 2004 and a weighted average life expectancy of
the subscription right of six years.
No plans for stock options exist that were not approved by the stockholders’ meeting.
Stock Appreciation Rights of Pfleiderer Grajewo S.A. and Pfleiderer Prospan S.A.
A separate bonus plan for executives at the Polish companies, Pfleiderer Grajewo S.A. and
Pfleiderer Prospan S.A., was issued in addition to the Stock Option Programs at Pfleiderer AG.
The Company resolved the price appreciation program on November 2, 2004. The reference
price is 167 PLN. The exercise barrier is 120 percent of the reference price. The qualifying period
ends at midnight on October 31, 2006. The Pfleiderer Grajewo S.A. share price as of December 31,
2004 was 200 PLN. No personnel expenses resulted from these stock appreciation rights in 2004.
Stock apprein
thousands ciation rights
Outstanding at beginning of year 0
Granted 81
Exercised 0
Forfeited 0
Outstanding at end of year 81
Exercisable at end of year 0
Derivative financial instruments are used to hedge interest and foreign currency positions with the
aim of minimizing the risks resulting from fluctuations in exchange rates and market interest
rates. The corporate guidelines state that such risks must generally be hedged. Only marketable
interest derivatives and forward exchange contracts that are concluded with banks of first class
standing are used for this purpose. Derivative financial transactions are restricted to the hedging
of the operative business and the related financing. The Company does not conduct any derivative
financial transactions for speculative purposes.
95
FINANCIAL STATEMENTS/NOTES PFLEIDERER GROUP
2004