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expected term. Under the simplified method, the expected term is equal to the midpoint between the vesting period and the contractual term of
the stock option. The risk-free interest rate is based on U.S. Treasury zero-
coupon issues with a term equal to the expected term of the option
assumed at the date of grant. Prior to the initial declaration of a cash dividend on August 1, 2011, the fair value of stock options, restricted stock
and restricted stock units were measured based upon an expected dividend yield of 0% as the Company did not historically pay cash dividends
on its common stock. For awards granted on or subsequent to August 1, 2011, the Company uses an annualized dividend yield based upon the
per share dividends declared by its Board of Directors. Estimated forfeiture rates were 14.9%, 14.5% and 14.5% as of December 31, 2011, 2010
and 2009, respectively.
The weighted-average fair values of stock options granted have been estimated utilizing the following assumptions:
Share-Based Compensation Expense
The following table represents the share-
based compensation expense that was included in cost of revenues and operating expenses in
the consolidated statement of operations for the years ended December 31, 2011, 2010 and 2009 (in thousands):
Restricted Stock
j2 Global has awarded restricted stock and restricted stock units to its board of directors and senior staff pursuant to the 1997 Plan and
2007 Plan. Compensation expense resulting from restricted stock and restricted unit grants is measured at fair value on the date of grant and is
recognized as share-based compensation expense over a five-
year vesting period. The Company granted 130,212, 101,082 and 730,603 shares of
restricted stock and restricted units during the years ended December 31, 2011, 2010 and 2009, respectively, and recognized $3.9 million, $4.0
million and $3.7 million, respectively, of related compensation expense. As of December 31, 2011, the Company had unrecognized share-
based
compensation cost of $11.3 million associated with these awards. This cost is expected to be recognized over a weighted-
average period of 2.47
years for awards and 4.11 years for units. The total fair value of restricted stock and restricted stock units vested during the years ended
December 31, 2011, 2010 and 2009 was $3.2 million, $3.8 million and $2.0 million, respectively.
The actual tax benefit realized for the tax
deductions from the vesting of restricted stock awards and units totaled $0.3 million, $1.2 million and $1.5 million, respectively, for the years
ended December 31, 2011, 2010 and 2009. In accordance with ASC 718, share-
based compensation is recognized on dividends paid related to
nonvested restricted stock not expected to vest in the amount of approximately $25,000 for the year ended December 31, 2011.
Restricted stock activity for the year ended December 31, 2011 is set forth below:
Restricted stock unit activity for the year ended December 31, 2011 is set forth below:
Years Ended December 31,
2011
2010
2009
Risk free interest rate
2.3%
2.6%
2.4%
Expected term (in years)
6.5
6.5
6.5
Dividend yield
2.6%
0.0%
0.0%
Expected volatility
41.8%
44.7%
54.9%
Year Ended December 31,
2011
2010
2009
Cost of revenues
$
982
$
1,217
$
1,263
Operting expenses:
Sales and marketing
1,431
1,826
1,818
Research, development and engineering
477
815
853
General and administrative
6,103
7,079
7,084
$
8,993
$
10,937
$
11,018
Weighted
-
Average
Grant
-
Date
Shares
Fair Value
Nonvested at January 1, 2011
816,670
$
19.59
Granted
113,212
29.20
Vested
(153,274
)
20.96
Canceled
(33,925
)
17.54
Nonvested at December 31, 2011
742,683
$
20.87
Number
of
Shares
Weighted
-
Average
Remaining
Contractual Life
(In Years)
Aggregate
Intrinsic
Value
Outstanding at January 1, 2010
—
Granted
17,500