THQ 2011 Annual Report Download - page 71

deductions of up to 15 percent of their base salary, subject to certain limitations, to purchase shares of our common stock at 85
percent of the lower of the fair market value of our common stock on the Offering Date or Purchase Date. The fair value of the
ESPP options granted is amortized over the offering period. At March 1, 2011 we had insufficient shares available for issuance
under the ESPP and accordingly we suspended offerings as of that date.
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 2011, 2010 and 2009, stock-based compensation expense recognized in our consolidated statements of operations was
as follows (amounts in thousands):


Cost of sales — Software amortization and royalties
Product development
Selling and marketing
General and administrative
Stock-based compensation expense before income taxes
Income tax benefit(1)
Total stock-based compensation expense after income taxes
)LVFDO<HDU(QGHG0DUFK

$ 2,761
1,234
1,246
3,874
9,115
(2,755)
$ 6,360

$ 3,408
2,606
1,181
4,688
11,883
(3,352)
$ 8,531

$ 5,797
3,242
2,432
7,128
18,599
(5,447)
$ 13,152
______________________________
(1) Income tax benefit presented for fiscal 2011, fiscal 2010, and a portion of fiscal 2009, is presented prior to consideration of our deferred tax asset
valuation allowance; see "Note 20—Income Taxes" for further information.
As discussed in "Note 2 — 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 (amounts in thousands):
Balance at March 31, 2009
Stock-based compensation expense capitalized during the period
Amortization of capitalized stock-based compensation expense
Balance at March 31, 2010
Stock-based compensation expense capitalized during the period
Amortization of capitalized stock-based compensation expense
Balance at March 31, 2011
$ 2,373
2,637
(3,408)
$ 1,602
2,259
(2,761)
$ 1,100
Stock-based compensation expense is based on awards that are ultimately expected to vest and accordingly, stock-based
compensation expense recognized in fiscal 2011, 2010 and 2009 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 U.S. Treasury yield in effect
at the time of grant.
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