Shutterfly 2010 Annual Report Download - page 80

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Valuation of Stock Options
The Company estimated the fair value of each option award on the date of grant using the Black-Scholes option-
pricing model and the
assumptions noted in the following table. Expected volatility is based on the historical and implied volatility of a peer group of publicly traded
entities. The expected term of options gave consideration to historical exercises, post vest cancellations and the options contractual term. The
risk-
free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity at the time of grant. The assumptions used to
value options granted during the twelve months ended December 31, 2009, 2008, and 2007, were as follows:
Employee stock-
based compensation expense recognized during the years ended December 31, 2009 and 2008 was calculated based on
awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if
necessary, in subsequent periods if actual forfeitures differ from those estimates.
Restricted Stock Units
The Company grants restricted stock units (“RSUs”) to its employees under the provisions of the 2006 Equity Incentive Plan. The cost
of RSUs is determined using the fair value of the Company's common stock on the date of grant. RSUs typically vest and become exercisable
annually, based on a two, three or four year total vesting term. Compensation cost is amortized on a straight-line basis over the requisite service
period.
Restricted Stock Unit Activity
A summary of the Company’
s restricted stock unit activity for the twelve months ended December 31, 2009, is as follows (share numbers in
thousands):
Year Ended December 31,
2009
2008
2007
Dividend yield
—
—
—
Annual risk free rate of return
2.3
%
2.5
%
4.1
%
Expected volatility
54.1
%
51.7
%
45.0
%
Expected term (years)
4.6
4.4
4.4
Restricted
Stock Units
& Awards
Weighted
Average
Grant Date
Fair Value
Balances, December 31, 2008
958
$
12.11
Granted
1,513
10.58
Released
(398)
13.74
Forfeited, cancelled or expired
(182)
12.89
Balances, December 31, 2009
1,891
$
10.48
Restricted stock units expected to vest, December 31, 2009
1,546
76