LeapFrog 2012 Annual Report Download - page 65

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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
RSUs
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 23.38% is currently being used, reflecting
historical and expected future forfeiture rate.
Stock-based compensation expense related to RSUs is calculated based on the market price of the Company’s
common stock on the grant date. The total market value of RSUs granted in 2012, 2011 and 2010, as
measured on the grant date, was $8,006, $2,750 and $7,989, respectively.
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. Stock-based compensation expense related
to the ESPP is estimated using the Black-Scholes option pricing model with the following assumptions for the
years ended December 31, 2012 and 2011:
Years Ended December 31,
2012 2011
Expected term (years) ............................. 0.5 0.5
Volatility ...................................... 44.2% − 59.8% 44.2%
Risk-free interest rate ............................. 0.05% − 0.14% 0.05%
Expected dividend yield ........................... —% —%
Impact of Stock-based Compensation
The following table summarizes stock-based compensation expense charged to SG&A and research and
development (‘‘R&D’’) expense for the years ended December 31, 2012, 2011 and 2010:
Years Ended December 31,
2012 2011 2010
SG&A:
Stock options ............................. $3,018 $1,912* $2,723
RSUs .................................. 2,782 2,876 2,164
ESPP .................................. 370 89 —
Total SG&A ............................ 6,170 4,877 4,887
R&D:
Stock options ............................. 513 434 741
RSUs .................................. 308 251 544
Total R&D ............................. 821 685 1,285
Total expense ........................... $6,991 $5,562 $6,172
* Amount includes the reversal of $950 in stock option compensation expense in connection with the
departure of certain senior-level employees including the former Chief Executive Officer.
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