Company: DLX
Filing Date: 2025-02-21
Form Type: 10-K
Source: 0000027996-25-000051
Chunk: 104

Company: DELUXE CORP
Filing Date: 2025-02-21
Form: 10-K
Item: Item 8
Chunk 104
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Employee share-based compensation – Employee share-based compensation includes non-qualified stock options, restricted stock units, performance share unit awards, and an employee stock purchase plan. The expense for share-based compensation is included in total cost of revenue and SG&A expense on the consolidated statements of income, based on the functional areas of the employees receiving the awards. Expense is recognized as follows:•Stock options – The fair value of stock options is measured on the grant date using the Black-Scholes option pricing model. The related compensation expense is recognized on the straight-line basis, net of estimated forfeitures, over the options' vesting periods.•Restricted stock units (RSUs) – The fair value of most of our RSUs is measured on the grant date based on the market value of our common stock. The related compensation expense, net of estimated forfeitures, is recognized over the applicable service period. Certain RSU awards may be settled in cash if an employee voluntarily leaves the company. These awards are included in accrued liabilities and other non-current liabilities on the consolidated balance sheets and are remeasured at fair value as of each balance sheet date.•Employee stock purchase plan (ESPP) – Compensation expense resulting from the 15% discount provided under our ESPP is recognized over each three-month purchase period.•Performance share unit (PSU) awards – These awards specify certain performance and market-based conditions that must be met for the awards to vest. For the portion of the awards based on a performance condition, the performance target is not considered in determining the fair value of the awards. Thus, fair value is measured on the grant date based on the market value of our common stock. The related compensation expense for this type of award is recognized, net of estimated forfeitures, over the related service period. The amount of compensation expense depends on our periodic assessment of the probability of achieving the targets and our estimate, which may vary over time, of the number of shares that will ultimately be issued. For the portion of the awards based on a market condition, fair value is calculated on the grant date using the Monte Carlo simulation model. All compensation costs for these awards are recognized, net of estimated forfeitures, over the related service period, even if the market condition is never satisfied.Postretirement benefit plan – We have historically offered certain health care benefits to a large number of our retired U.S. employees who were hired prior to January 1, 2002. The calculation of our postretirement benefit income and obligation involves various actuarial assumptions and methodologies. These