Stamps.com 2008 Annual Report Download - page 46

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stock. Diluted net income per share is calculated by dividing net income during a reported period by the sum of the weighted
average number of common shares outstanding plus common stock equivalents for the period. 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):
Year Ended December 31,
2008
2007
2006
Net income
$
10,164
$
10,666
$
16,462
Basic – weighted average common shares
19,081
20,815
23,233
Diluted effect of common stock equivalents
264
379
799
Diluted – weighted average common shares
19,345
21,194
24,032
Net income per share:
Basic $
0.53
$
0.51
$
0.71
Diluted $
0.53
$
0.50
$
0.69
Stock-Based Compensation
We account for stock-based awards to employees and directors pursuant to Statement of Financial Accounting Standards
(SFAS) No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R), and related Securities and Exchange Commission rules
included in Staff Accounting Bulletin No. 107 (SAB 107). SFAS 123R requires us to estimate the fair value of share-based
payment awards on the date of grant using an option-pricing model and to 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. SFAS 123R requires forfeitures to be estimated at the time of grant and revised, 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 single method over their respective vesting periods of three
to five years.
Year Ended December 31,
2008
2007
2006
Anti-dilutive stock options shares
2,642
2,230
557
F-10
TABLE OF CONTENTS
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
The following table sets forth the stock-based compensation expense that we recognized under SFAS 123R for the periods
indicated (in thousands):
2008
2007
2006
Stock-based compensation expense relating to:
Employee and director stock options $
3,220
$
2,623
$
1,828
Employee stock purchases
124
84
810
Total stock-based compensation expense $
3,344
$
2,707
$
2,638
Stock-based compensation expense relating to:
Cost of revenues $
289
$
291
$
325