Stamps.com 2012 Annual Report Download - page 61

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STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table reconciles share amounts utilized to calculate basic and diluted net income per share (in thousands, except per share data):
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 2012 and 2011.
Table of Contents
Year Ended December 31,
2012
2011
2010
Net income
$
38,557
$
26,265
$
5,532
Basic
-
weighted average common shares
16,079
14,767
14,529
Dilutive effect of common stock equivalents
714
401
156
Diluted - weighted average common shares
16,793
15,168
14,685
Net income per share:
Basic
$
2.40
$
1.78
$
0.38
Diluted
$
2.30
$
1.73
$
0.38
Year ended December 31,
2012
2011
2010
Anti-dilutive stock option shares
119
1,023
1,928
F
-
13