Stamps.com 2011 Annual Report Download - page 62

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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The calculation of dilutive shares excludes the effect of the following options that are considered anti-dilutive (in thousands):
Stock-Based Compensation
We estimate the fair value of share-based payment awards on the date of grant using an option-pricing model and recognize stock-
based
compensation expense during each period based on the value of that portion of share-
based payment awards that is ultimately expected to vest
during the period, reduced for estimated forfeitures. We estimate forfeitures at the time of grant based on historical data and revise, if necessary,
in subsequent periods if actual forfeitures differ from those estimates. Compensation expense recognized for all employee stock options granted
is recognized using the straight-line method over their respective vesting periods of three to five years.
During the fourth quarter of 2010, in connection with our special dividend of $2.00 per share, in order to prevent that dividend from diluting or
enlarging the rights of the holders of outstanding stock options and purchase rights under certain of our employee plans, including our equity
plans, we reduced the exercise price of affected options and rights in a manner that is both value neutral and that did not result in the incurrence
of any incremental stock-
based compensation expense. Because the exercise price could not be adjusted in this manner without adverse tax
consequences for certain option grants, we made value neutral cash payments with respect to those option grants, which compensated option
holders for lost economic value in those option grants. These cash payments were expensed as compensation and did not affect our stock-
based
compensation expense. We did not recognize any similar cash payment in 2011.
The following table sets forth the stock-based compensation expense that we recognized for the periods indicated (in thousands):
Table of Contents
Year Ended December 31,
2011
2010
2009
Net income
$
26,265
$
5,532
$
6,177
Basic
-
weighted average common shares
14,767
14,529
16,238
Dilutive effect of common stock equivalents
401
156
131
Diluted - weighted average common shares
15,168
14,685
16,369
Net income per share:
Basic
$
1.78
$
0.38
$
0.38
Diluted
$
1.73
$
0.38
$
0.38
Year ended December 31,
2011
2010
2009
Anti-dilutive stock option shares
1,023
1,928
2,677
2011
2010
2009
Stock
-
based compensation expense relating to:
Employee and director stock options
$
3,112
$
2,725
$
3,044
Employee stock purchases
307
115
53
Total stock-based compensation expense
$
3,419
$
2,840
$
3,097
F
-
12