THQ 2010 Annual Report Download - page 78

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Stock-based compensation includes all awards and purchase opportunities: stock options, PARS, PARSUs,
DSUs, RSUs and ESPP options. Nonvested shares and vested shares refer to our PARS, PARSU, DSU and
RSU awards.
For fiscal 2010, 2009 and 2008, stock-based compensation expense recognized in the consolidated
statements of operations was as follows (in thousands):
Year Ended March 31,
2010
2009
2008
Cost of sales—software amortization and royalties....
.
$3,408 $5,797 $6,800
Product development .....................................................
.
2,606 3,242 4,773
Selling and marketing .....................................................
.
1,181 2,432 2,654
General and administrative............................................
.
4,688 7,128 8,444
Stock-based compensation expense before
income taxes ............................................................
.
11,883 18,599 22,671
Income tax benefit(1)........................................................
.
(3,352) -(5,447) (6,132)
Total stock-based compensation expense after
income taxes ............................................................
.
$8,531 $13,152 $16,539
(1) Income tax benefit presented for fiscal 2010 and a portion of fiscal 2009 is presented
prior to consideration of our deferred tax asset valuation allowance; see “Note 19—
Income Taxes” for further information.
As discussed in “Note 1—Description of Business and Summary of Significant Accounting Policies,” we
capitalize relevant amounts of stock-based compensation expense. The following table summarizes
stock-based compensation expense included in our consolidated balance sheets as a component of
software development (in thousands):
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)
Stock-based compensation expense capitalized during the period ........ –2,637)
Amortization of capitalized stock-based compensation expense ............. -(3,408)
Balance at March 31, 2010 ........................................................................... $1,602)
Stock-based compensation expense is based on awards that are ultimately expected to vest and
accordingly, stock-based compensation expense recognized in fiscal 2010, 2009, and 2008 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 and ESPP options granted is estimated on the date of grant using the
Black-Scholes option pricing model. 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 and the expected term for our ESPP options is the six-month offering period. 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 stock options and ESPP options are based on the
US Treasury yield in effect at the time of grant.