Classmates.com 2007 Annual Report Download - page 113

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UNITED ONLINE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. STOCK-BASED COMPENSATION PLANS (Continued)
Stock Options
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model, consistent with the
provisions of SFAS No. 123R and SAB No. 107. Because option-pricing models require the use of subjective assumptions, changes in these
assumptions can materially affect the fair value of the options. The Company calculates expected volatility based on historical volatility of the
Company's common stock. The expected term, which represents the period of time that options granted are expected to be outstanding, is
estimated based on historical exercise experience. The Company evaluated historical exercise behavior when determining the expected term
assumptions. The risk-free interest rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for
the expected term of the option. The Company determines the expected dividend yield percentage by dividing the expected annual dividend by
the closing market price of United Online common stock at the date of grant.
The following table summarizes the assumptions used in the Black-Scholes option-pricing model. The assumptions represent the weighted
average of the applicable assumption used to value stock options at their grant date. The Company did not grant any stock options in the year
ended December 31, 2007.
F-31
Year Ended
December 31,
2007
2006
2005
Risk
-
free interest rate
N/A
4.6
%
4.2
%
Expected term (in years)
N/A
3.8
5.0
Dividend yield
N/A
6.1
%
2.3
%
Volatility
N/A
60.0
%
91.6
%