Stamps.com 2013 Annual Report Download - page 64

STAMPS.COM INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
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
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 of the options. We base the risk-free interest rate on U.S. Treasury
zero-coupon issues with a remaining term equal to the expected life of the options 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:
We elected to utilize the alternative transition method for calculating the tax effects of stock-based compensation. The alternative transition
method includes computational guidance to establish the beginning balance of the additional paid-in capital pool (“APIC Pool”)
related to the tax
effects of employee stock-based compensation, and a simplified method to determine the subsequent impact on the APIC Pool for employee
stock-based compensation awards that are vested and outstanding upon adoption of ASC 718. There has been no tax benefit recognized to date
from the exercise of stock options. A tax benefit will be recorded in additional paid-in capital when these deductions reduce our future income
taxes payable.
At December 31, 2013, we had approximately $4.1 million of total unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under our stock incentive plans, which is expected to be recognized over a weighted-average period of
approximately 2 years.
Treasury Stock
During 2013, 2012 and 2011, we repurchased approximately 179,000 shares for $4.3 million, 1.5 million shares for $31.8 million and 426,000
shares for $5.3 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 based on the financial data provided in our financial statements as a single operating segment.
Website Development Costs
We develop and maintain our website. Costs associated with the operation of our website consist primarily of software and hardware purchased
from third parties and administrative cost relating to the maintenance and development of the website. Costs related to the purchase of software
and hardware are capitalized based on our capitalization policy. These capitalized costs are amortized based on their estimated useful life.
Administrative costs related to the maintenance and development of our website are expensed as incurred.
F-14
Table of Contents
2013
2012
2011
Expected dividend yield
—
—
—
Risk
-
free interest rate
0.53
%
0.37
%
1.39
%
Expected volatility
48
%
50
%
48
%
Expected life (in years)
3.6
3.7
4.4
Expected forfeiture rate
7
%
7
%
9
%