Vistaprint 2008 Annual Report Download - page 78

VISTAPRINT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Years Ended June 30, 2008, 2007 and 2006
(in thousands, except share and per share data)
the Company filed its Registration Statement on Form S-1 with the Securities and Exchange
Commission, and July 1, 2005, but not yet vested as of July 1, 2005, based on the grant date fair value
estimated in accordance with the original provisions of Statement 123, and (b) compensation cost for all
share-based payments granted subsequent to July 1, 2005, based on the grant-date fair value estimated
in accordance with the provisions of Statement 123(R). As permitted under the modified-prospective-
transition method guidelines of Statement 123(R), results for prior periods have not been restated.
The Company recorded share-based compensation costs of $14,747, $8,765 and $4,850 for the
years ended June 30, 2008, 2007 and 2006, respectively. No income tax benefit was recognized in the
accompanying consolidated statements of income for share-based compensation arrangements for the
years ended June 30, 2008, 2007 and 2006. Share-based compensation costs capitalized as part of
software and website development costs were $697, $434 and $176 for the years ended June 30,
2008, 2007 and 2006, respectively.
At June 30, 2008, there was $60,536 of total unrecognized compensation cost related to
non-vested, share-based compensation arrangements. This cost is expected to be recognized over a
weighted average period of 3.0 years.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option
pricing model. Expected volatilities are based on historical volatilities from guideline companies since the
Company does not have sufficient history as a publicly traded company. Implied volatilities were
considered, but the guideline companies selected do not have an active market for their options. The
Company also uses the expected lives used by guideline companies to estimate the expected life of
options granted. The expected life of options granted represents the period of time that options granted
are expected to be outstanding. The Company uses historical data to estimate employee terminations
and resulting forfeiture rates within the option pricing model. The risk-free interest rate for periods within
the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of the
grant. The fair value of restricted share grants is recognized using the straight-line recognition method.
Weighted-average assumptions used for grants in 2008, 2007 and 2006 are as follows:
Year Ended June 30,
2008 2007 2006
Risk-free interest rate................................................ 3.75% 4.71% 4.36%
Expected dividend yield.............................................. 0% 0% 0%
Expected life (years)................................................. 4.25 4.25 4.25
Expected volatility ................................................... 52% 59% 60%
Weighted average fair value of options granted ........................ $15.82 $13.88 $8.81
On April 26, 2007, the Company entered into a Transition Agreement (the “Transition Agreement)
with a departing employee. Pursuant to the terms of the Transition Agreement, the employee agreed to
remain employed through May 1, 2007. On May 1, 2007 share options granted to this employee, which
would have become vested on or before May 1, 2008, for an aggregate of 48,443 common shares,
immediately became vested and exercisable in accordance with the terms of the Transition Agreement.
For the year ended June 30, 2007, the Company recorded a share based compensation charge of
$1,406 related to the modification of the vesting of the options which was recognized on the date of
termination. On May 1, 2007, all remaining vesting of the share options granted to this employee, for
an aggregate of 47,951 common shares ceased, and therefore were forfeited upon termination.
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