LeapFrog 2011 Annual Report Download - page 76
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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
The assumptions used in the Black-Scholes option valuation model and the weighted average grant date fair
value per share for the three years ended December, 31, 2011, 2010 and 2009 were as follows:
Years Ended December 31,
2011 2010 2009
Estimate of fair value for total awards using Black-Scholes..... $4,075 $2,169 $2,497
Expected term (years) .............................. 4.86 5.64 6.12
Volatility ....................................... 58.5% 56.5% 51.8%
Risk-free interest rate .............................. 1.7% 2.3% 2.5%
Expected dividend yield............................. —% —% —%
There were no stock option grants valued using a Monte-Carlo simulation during the fiscal year ended
December 31, 2011 and 2010. During the second quarter of 2009, fair value for those options granted with
vesting based upon a service condition and a market condition, the fair value of which was $12,955, was
estimated using the Monte-Carlo simulation with an expected term of 3.25 years, volatility of 55.0%, risk-free
interest rate of 1.52% and zero expected dividend yield.
RSUs and RSAs
RSAs and RSUs are payable in shares of the Company’s Class A common stock. The fair value of these
stock-based awards is equal to the closing market price of the Company’s stock on the date of grant. The
grant date fair value is recognized on a straight-line basis in compensation expense over the vesting period of
these stock-based awards, which is generally four years.
With regard to RSUs, a forfeiture assumption of approximately 20% is currently being used, reflecting
historical and expected future forfeiture rate.
ESPP
Effective September 1, 2011, the Company increased the discount from the fair market value of the
Company’s common stock offered to participants from 5% to 15%, which resulted in stock-based
compensation expense due to departure from the IRS safe harbor. The fair value of shares granted under the
ESPP was $132 as of December 31, 2011, estimated using the expected term of 0.5 years, volatility of 44.2%,
risk-free interest rate of 0.05%, zero forfeiture rate and zero expected dividend yield.
Non-Employee Stock-Based Awards
Stock-based compensation arrangements with non-employees are accounted for using a fair value approach.
The compensation costs resulting from these arrangements are subject to re-measurement over the
vesting terms.
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