Shutterfly 2013 Annual Report Download - page 97

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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, 2013, 2012, and 2011, were as follows:
Year Ended December 31,
2013 2012 2011
Dividend yield ...................................———
Annual risk free rate of return ....................... 0.8% 0.8% 1.5%
Expected volatility ................................ 47.0% 56.5% 53.3%
Expected term (years) .............................. 4.2 4.3 4.3
Employee stock-based compensation expense recognized during the years ended December 31, 2013
and 2012 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
Plan and inducement awards to certain 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,
2013, is as follows (share numbers in thousands):
Number Weighted
of Average
Units Grant Date
Outstanding Fair Value
Awarded and unvested, December 31, 2012 ........................ 3,252 $ 31.10
Granted ................................................ 1,996 45.43
Vested ................................................. (1,184) 29.89
Forfeited ................................................ (202) 36.67
Awarded and unvested, December 31, 2013 ........................ 3,862 $ 38.59
Restricted stock units expected to vest, December 31, 2013 ............. 3,441
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