NVIDIA 2010 Annual Report Download - page 97

NVIDIA CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Note 2 – Stock Option Purchase
In the first quarter of fiscal year 2010, we completed a cash tender offer for certain employee stock options. The tender offer
applied to outstanding stock options held by employees with an exercise price equal to or greater than $17.50 per share. None of the
non-employee members of our Board of Directors or our officers who file reports under Section 16(a) of the Securities Exchange Act
of 1934, as amended, were eligible to participate in the tender offer. All eligible options with exercise prices equal to or greater than
$17.50 per share but less than $28.00 per share were eligible to receive a cash payment of $3.00 per option in exchange for the
cancellation of the eligible option. All eligible options with exercise prices equal to or greater than $28.00 per share were eligible to
receive a cash payment of $2.00 per option in exchange for the cancellation of the eligible option.
Our consolidated statement of operations for fiscal year 2010 includes stock-based compensation charges related to the stock
option purchase (in thousands):
Cost of revenue $ 11,412
Research and development 90,456
Sales, general and administrative 38,373
Total $ 140,241
A total of 28.5 million options were tendered under the offer for an aggregate cash purchase price of $78.1 million, which was
paid in exchange for the cancellation of the eligible options. As a result of the tender offer, we incurred a charge of $140.2 million
consisting of $124.1 million related to the remaining unamortized stock based compensation expense associated with the unvested
portion of the options tendered in the offer, $11.6 million related to stock-based compensation expense resulting from amounts paid in
excess of the fair value of the underlying options, plus $4.5 million related to associated payroll taxes, professional fees and other
costs.
Note 3 - Stock-Based Compensation
We measure stock-based compensation expense at the grant date of the related equity awards, based on the fair value of the
awards, and recognize the expense using the straight-line attribution method over the requisite employee service period adjusted for
estimated forfeitures. We estimate the fair value of employee stock options on the date of grant using a binomial model and we use the
closing trading price of our common stock on the date of grant as the fair value of awards of restricted stock units, or RSUs. We
calculate the fair value of our employee stock purchase plan using the Black-Scholes model.
In addition to the stock-based compensation expense related to our cash tender offer to purchase certain employee stock options
as described in Note 2 – Stock Option Purchase, our consolidated statements of operations include stock-based compensation
expense, net of amounts capitalized as inventory, as follows:
Year Ended
January 31, January 25, January 27,
2010 2009 2008
(In thousands)
Cost of revenue $ 12,050 $ 11,939 $ 10,886
Research and development 61,337 98,007 76,617
Sales, general and administrative 33,704 52,760 45,862
Total $ 107,091 $ 162,706 $ 133,365
As of January 31, 2010 and January 25, 2009, the aggregate amount of unearned stock-based compensation expense related to
our equity awards was $125.3 million and $193.8 million, respectively, adjusted for estimated forfeitures. As of January 31, 2010
and January 25, 2009, we expect to recognize the unearned stock-based compensation expense related to equity awards over an
estimated weighted average amortization period of 1.80 years and 1.82 years, respectively. As of January 31, 2010, we expect to
recognize the unearned stock-based compensation expense related to RSUs over an estimated weighted average amortization period of
2.3 years. During fiscal year 2009, we did not grant any RSUs.
Stock-based compensation capitalized in inventories resulted in a charge of $2.5 million and benefit of $2.0 million in cost of
revenue during the fiscal years ended January 31, 2010 and January 25, 2009, respectively.
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Source: NVIDIA CORP, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠