THQ 2009 Annual Report Download - page 93

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For the fiscal years ended March 31, 2009, 2008 and 2007, stock-based compensation expense recognized
in the consolidated statements of operations was as follows (in thousands):
Year Ended March 31,
2009 2008 2007
Cost of sales—software amortization and royalties .... $ 5,797 $ 6,800 $ 2,087
Product development ......................... 3,242 4,773 3,364
Selling and marketing ........................ 2,432 2,654 2,817
General and administrative .................... 7,128 8,444 10,704
Stock-based compensation expense before income
taxes ................................. 18,599 22,671 18,972
Income tax benefit ........................... (5,447) (6,132) (5,060)
Total stock-based compensation expense after
income taxes ............................ $13,152 $16,539 $13,912
Additionally, stock-based compensation expense is capitalized in accordance with FAS 86, as discussed in
‘‘Note 1—Description of Business and Summary of Significant Accounting Policies.’’ The following table
summarizes stock-based compensation expense included in our consolidated balance sheets as a
component of software development (in thousands):
Balance at April 1, 2007 ...................................... $3,837
Stock-based compensation expense capitalized during the period ........ 5,765
Amortization of capitalized stock-based compensation expense .......... (6,800)
Balance at March 31, 2008 .................................... $2,802
Stock-based compensation expense capitalized during the period ........ 5,368
Amortization of capitalized stock-based compensation expense .......... (5,797)
Balance at March 31, 2009 .................................... $2,373
FAS 123R requires that stock-based compensation expense be based on awards that are ultimately
expected to vest and accordingly, stock-based compensation expense recognized in fiscal years ended
March 31, 2009, 2008, and 2007 has been reduced by estimated forfeitures. Our estimate of forfeitures is
based on historical forfeiture behavior as well as any expected trends in future forfeiture behavior.
The fair value of stock options granted is estimated on the date of grant using the Black-Scholes option
pricing model with the weighted-average assumptions noted in the table below. Anticipated volatility is
based on implied volatilities from traded options on our stock and on our stock’s historical volatility. The
expected term of our stock options granted is based on historical exercise data and represents the period of
time that stock options granted are expected to be outstanding. Separate groups of employees that have
similar historical exercise behavior are considered separately for valuation purposes. The risk-free rate for
periods within the expected lives of options and ESPP are based on the US Treasury yield in effect at the
time of grant.
The fair value of our ESPP options for the six month offering periods that began on September 3, 2008,
March 3, 2008, September 4, 2007, and March 1, 2007, was estimated using the Black-Scholes option
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