Digital River 2006 Annual Report Download - page 95

Download and view the complete annual report

Please find page 95 of the 2006 Digital River annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 114

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114

on estimated fair values. The following table summarizes stock-based compensation expense, net of tax,
related to our stock-based compensations plans recognized under SFAS 123(R):
March 31 June 30 September 30 December 31
Year Ended
December 31, 2006
2006 Three Months Ended
(In thousands) (In thousands)
Costs and expenses
Direct cost of services ........... $ 214 $ 218 $ 197 $ 213 $ 842
Network and infrastructure ........ 86 84 78 81 329
Sales and marketing . ............ 1,289 1,323 1,268 1,302 5,182
Product research and development . . 585 591 556 560 2,292
General and administrative ........ 1,239 1,303 1,357 1,360 5,259
Stock-based compensation included
in costs and expenses .......... 3,413 3,519 3,456 3,516 13,904
Tax benefit ..................... (1,200) (1,218) (1,221) (1,229) (4,868)
Stock-based compensation expense, net
oftax ....................... $2,213 $ 2,301 $ 2,235 $ 2,287 $ 9,036
The following table reflects net income and basic and diluted net income per share for 2006 compared
with the pro forma information for 2005 and 2004 as if the Company had applied the fair value recognition
provisions SFAS No. 123 to stock-based compensation during 2005 and 2004 (in thousands, except per share
amounts):
2006
Pro Forma
2005
Pro Forma
2004
As Restated(1) As Restated(1)
For the Years Ended December 31,
Net income, as reported for prior periods(2) . . . .................. $ N/A $56,512 $ 34,507
Stock-based compensation expense included in reported net income, net
oftax............................................... 184 817
Stock-based compensation expense determined under the fair value
based method for all awards . ............................. (13,904) (13,170) (27,236)
Tax benefit(3) . . ........................................ 4,868 4,588 0
Stock-based compensation expense, net of tax(4) ................. (9,036) (8,582) (27,236)
Net income, including the effect of stock-based compensation
expense(5) . . . ........................................ $60,810 $ 48,114 $ 8,088
Basic net income per share — as reported for prior periods(1)(2) ...... N/A $ 1.64 $ 1.07
Diluted net income per share — as reported for prior periods(1)(2) . . . . N/A $ 1.41 $ 0.94
Basic net income per share, including the effect of stock-based
compensation expense(5) ................................. $ 1.58 $ 1.39 $ 0.25
Diluted net income per share, including the effect of stock-based
compensation expense(5) ................................. $ 1.40 $ 1.24 $ 0.26
(1) See Note 2, “Restatement of Consolidated Financial Statements,” in Notes to Consolidated Financial
Statements.
91
DIGITAL RIVER, INC.
Notes to Consolidated Financial Statements — (Continued)