Shutterfly 2012 Annual Report Download - page 85

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U.S. Treasury Constant Maturity at the time of grant. The assumptions used to value options granted
during the twelve months ended December 31, 2012, 2011, and 2010, were as follows:
Year Ended December 31,
2012 2011 2010
Dividend yield ...................................———
Annual risk free rate of return ....................... 0.8% 1.5% 1.9%
Expected volatility ................................ 56.5% 53.3% 51.1%
Expected term (years) .............................. 4.3 4.3 4.5
Employee stock-based compensation expense recognized during the years ended December 31, 2012
and 2011 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 and Inducement awards to new employees upon hire in accordance with NASDAQ
Listing Rule 5635(c)(4). 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 are settled annually, based on a 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,
2012, is as follows (share numbers in thousands):
Number Weighted
of Average
Units Grant Date
Outstanding Fair Value
Awarded and unvested, December 31, 2011 ........................ 1,969 $ 31.33
Granted ................................................ 2,566 28.55
Vested ................................................. (885) 23.18
Forfeited ................................................ (398) 33.40
Awarded and unvested, December 31, 2012 ........................ 3,252 $ 31.10
Restricted stock units expected to vest, December 31, 2012 ............. 2,895
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