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STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table sets forth the stock-based compensation expense that we recognized 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
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 FASB ASC Topic No. 718 Compensation – Stock
Compensation (“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.
Treasury Stock
During 2014, 2013 and 2012, we repurchased approximately 435,000 shares for $12.9 million, 179,000 shares for $4.3 million and 1.5 million
shares for $31.8 million, respectively.
F-14
Table of Contents
2014
2013
2012
Stock
-
based compensation expense relating to:
Employee and director stock options
$
4,473
$
3,751
$
3,438
Employee stock purchases
326
741
553
Total stock-based compensation expense
$
4,799
$
4,492
$
3,991
Stock
-
based compensation expense relating to:
Cost of revenues
$
402
$
406
$
325
Sales and marketing
955
864
873
Research and development
998
990
893
General and administrative
2,444
2,232
1,900
Total stock-based compensation expense
$
4,799
$
4,492
$
3,991
2014
2013
2012
Expected dividend yield
—
—
—
Risk
-
free interest rate
0.87
%
0.53
%
0.37
%
Expected volatility
50
%
48
%
50
%
Expected life (in years)
3.5
3.6
3.7
Expected forfeiture rate
%
7
%
7
%