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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2012
Stock-Based Compensation  
Stock-Based Compensation

14.       STOCK-BASED COMPENSATION

 

The Company recognized stock-based compensation of $52.0 million, $47.4 million and $52.6 million for the years ended December 31, 2012, 2011 and 2010, respectively. Stock-based compensation for the year ended December 31, 2011 included $3.0 million related to the modification of the vesting and exercise terms for a certain employee's equity awards. The Company capitalized $2.2 million and $3.1 million of stock-based compensation expense as property and equipment during the years ended December 31, 2012 and 2011, respectively, and did not capitalize any stock-based compensation expense for the year ended December 31, 2010.

 

       

Summary of Stock-Based Compensation Plans—The Company maintains equity incentive plans that provide for the grant of stock-based awards to its directors, officers and employees. The 2007 Equity Incentive Plan (“2007 Plan”) provides for the grant of non-qualified and incentive stock options, as well as restricted stock units, restricted stock and other stock-based awards. Exercise prices in the case of non-qualified and incentive stock options are not less than the fair value of the underlying common stock on the date of grant. Equity awards typically vest ratably over various periods, generally four years, and generally expire ten years from the date of grant. In January 2013, the Company began granting awards under the 2007 Plan that allow for vesting of such awards upon retirement if the employee has reached certain eligibility requirements. The Company will recognize compensation expense for all stock-based compensation over the shorter of (i) the four year vesting period or (ii) the period from the date of grant to the date the employee becomes eligible for such retirement benefits. As of December 31, 2012, the Company had the ability to grant stock-based awards with respect to an aggregate of 18.6 million shares of common stock under the 2007 Plan.

 

Stock Options—The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions noted in the table below. The risk-free treasury rate is based on the U.S. Treasury yield approximating the estimated life in effect at the accounting measurement date. The expected life (estimated period of time outstanding) is estimated using the vesting term and historical exercise behavior of Company employees. The expected volatility is based on historical volatility for a period equal to the expected life of the stock options. The expected annual dividend is the Company's best estimate of expected future dividend yield.

 

Key assumptions used to apply this pricing model are as follows:

      
 2012 2011 2010
Range of risk-free interest rate 0.62%-1.03% 0.90% - 2.24% 1.41% - 2.39%
Weighted average risk-free interest rate 0.92% 1.97% 2.35%
Expected life of option grants 4.40 years 4.50 years 4.60 years
Range of expected volatility of underlying stock price 36.53% - 37.86% 36.89% - 38.13% 37.11% - 37.48%
Weighted average expected volatility of underlying stock price 37.84% 36.98% 37.14%
Weighted average expected annual dividends 1.50% 0.03% N/A
      

The weighted average grant date fair value per share during the years ended December 31, 2012, 2011 and 2010 was $17.46, $17.18 and $15.03, respectively. The intrinsic value of stock options exercised during the years ended December 31, 2012, 2011 and 2010 was $59.5 million, $54.6 million and $62.7 million, respectively. As of December 31, 2012, total unrecognized compensation expense related to unvested stock options was approximately $30.8 million and is expected to be recognized over a weighted average period of approximately two years. The amount of cash received from the exercise of stock options was approximately $50.9 million during the year ended December 31, 2012. During the year ended December 31, 2012, the Company realized approximately $2.1 million of state tax benefits from the exercise of stock options.

 

The following table summarizes the Company's option activity for the periods presented:

           
  Options Weighted Average Exercise Price Weighted Average Contractual Term (Years)  Aggregate Intrinsic Value (in millions)
           
Outstanding as of January 1, 2012  6,376,244 $ 37.36     
           
Granted  1,237,172   62.22     
Exercised  (1,614,657)   31.53     
Forfeited  (162,839)   44.19     
Expired  (5,975)   9.74     
           
Outstanding as of December 31, 2012  5,829,945 $ 44.09  6.42 $ 193.45
           
Exercisable as of December 31, 2012  3,170,504 $ 37.07  4.86 $ 127.46
Vested or expected to vest as of December 31, 2012  5,829,945 $ 44.09  6.42 $ 193.45
           
           

The following table sets forth information regarding options outstanding at December 31, 2012:

             
Options Outstanding Options Exercisable
             
Outstanding Number of Options Range of Exercise Price Per Share Weighted Average Exercise Price Per Share Weighted Average Remaining Life (Years) Options Exercisable Weighted Average Exercise Price Per Share
703,811 $5.51 - $28.39 $26.32 5.47  458,581 $25.22
733,695 31.06 - 31.54  31.49 3.52  691,370  31.50
972,017 32.21- 37.70  37.52 4.50  970,173  37.53
1,237,938 38.06 - 47.25  43.41 6.07  823,641  43.56
966,548 50.78- 58.60  51.25 8.23  198,019  51.14
1,215,936 62.00- 71.50  62.22 9.20  28,720  62.00
             
5,829,945 $5.51 - $71.50 $44.09 6.42  3,170,504 $37.07
             

Restricted Stock Units—During the year ended December 31, 2012, the Company granted restricted stock units pursuant to the 2007 Plan. Restricted stock units typically vest ratably over various periods, generally four years. The Company recognizes the expense associated with the units over the vesting term. The expense is based on the fair value of the units awarded at the date of grant, times the number of shares subject to the units awarded.

 

The following table summarizes the Company's restricted stock unit activity during the year ended December 31, 2012:

 

      
  Number of Units Weighted Average Grant Date Fair Value
      
Outstanding as of January 1, 2012  2,197,460 $42.39
Granted  836,835  62.34
Vested  (893,739)  39.75
Forfeited  (172,003)  48.20
      
Outstanding as of December 31, 2012  1,968,553 $ 51.56
      
Expected to vest, net of estimated forfeitures, as of December 31, 2012  1,898,708 $ 51.37
      

The total fair value of restricted stock units which vested during the year ended December 31, 2012 was $56.3 million.

 

As of December 31, 2012, total unrecognized compensation expense related to unvested restricted stock units granted under the 2007 Plan was $68.8 million and is expected to be recognized over a weighted average period of approximately two years.

 

Employee Stock Purchase Plan —The Company maintains an employee stock purchase plan (“ESPP”) for all eligible employees. Under the ESPP, shares of the Company's common stock may be purchased on the last day of each bi-annual offering period at 85% of the lower of the fair value on the first or the last day of such offering period. Employees may purchase shares having a value not exceeding 15% of their gross compensation during an offering period and may not purchase more than $25,000 worth of stock in a calendar year (based on market values at the beginning of each offering period). The offering periods run from June 1 through November 30 and from December 1 through May 31 of each year. During the 2012, 2011 and 2010 offering periods employee contributions were accumulated to purchase an estimated 87,749, 79,049 and 75,354 shares, respectively, at weighted average prices per share of $51.59, $44.56 and $34.16, respectively. The fair value of the ESPP offerings is estimated on the offering period commencement date using a Black-Scholes pricing model with the expense recognized over the expected life, which is the six month offering period over which employees accumulate payroll deductions to purchase the Company's common stock. The weighted average fair value for the ESPP shares purchased during 2012, 2011 and 2010 was $13.64, $12.18 and $9.43, respectively. At December 31, 2012, 3.5 million shares remain reserved for future issuance under the plan.

 

Key assumptions used to apply this pricing model for the years ended December 31, are as follows:

      
 2012 2011 2010
Range of risk-free interest rate 0.05% - 0.12% 0.11% - 0.20% 0.22% - 0.23%
Weighted average risk-free interest rate 0.08% 0.16% 0.22%
Expected life of shares6 months 6 months 6 months
Range of expected volatility of underlying stock price 33.16% - 33.86% 33.96% - 34.55% 35.26% - 35.27%
Weighted average expected volatility of underlying stock price 33.54% 34.28% 35.26%
Expected annual dividends 1.50% N/A N/A