Stamps.com 2010 Annual Report Download - page 71

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TABLE OF CONTENTS
STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
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.
The following table sets forth the stock-based compensation expense that we recognized under for the periods indicated (in
thousands):
We use the Black-Scholes option valuation model to estimate the fair value of share-based payment awards on the date of
grant, which requires us to make a number of highly complex and subjective assumptions, including stock price volatility,
expected term, risk-free interest rates and actual and projected employee stock option exercise behaviors. In the case of options
we grant, our assumption of expected volatility is based on the historical volatility of our stock price over the term equal to the
expected life. We base the risk-free interest rate on U.S. Treasury zero-coupon issues with a remaining term equal to the
expected life assumed at the date of grant. The estimated expected life represents the weighted-average period the stock options
are expected to remain outstanding determined based on an analysis of historical exercise behavior.
The following are the weighted average assumptions used in the Black-Scholes valuation model for the periods indicated:
2010
2009
2008
Stock-based compensation expense relating to:
Employee and director stock options $
2,725
$
3,044
$
3,220
Employee stock purchases
115
53
124
Total stock-based compensation expense $
2,840
$
3,097
$
3,344
Stock-based compensation expense relating to:
Cost of revenues $
253
$
275
$
289
Sales and marketing
727
769
754
Research and development
575
651
631
General and administrative
1,285
1,402
1,670
Total stock-based compensation expense $
2,840
$
3,097
$
3,344
Treasury Stock
During 2010, 2009 and 2008, we repurchased 1.5 million shares for $13.8 million, 1.6 million shares for $13.7 million and
2.7 million shares for $26.9 million, respectively.
Segment Information
We operate in a single segment. We are a provider of Internet-based postage solutions located in a single geographic location
from which substantially all of our revenue is generated. While components of revenue include both services and products
associated with our postage solutions, our Chief Executive Officer, who is the chief operating decision maker, evaluates
performance, makes operating decisions and allocates resources
2010
2009
2008
Expected dividend yield
—
—
—
Risk-free interest rate
1.67
%
2.00
%
2.90
%
Expected volatility
49
%
53
%
51
%
Expected life (in years)
4.5
4.5
5
Expected forfeiture rate
20
%
20
%
17
%
F-11