Stockholders' Equity

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders’ Equity

On November 2, 2012, the Board of Directors (the “Board”) of the Company authorized and declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.001 per share (the “Common Shares”), of the Company to stockholders of record at the close of business on November 12, 2012 (the “Record Date”). Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series A Participating Preferred Stock, par value $0.001 per share (the “Preferred Shares”), of the Company at an exercise price of $350 per one one-thousandth of a Preferred Share, subject to adjustment (the “Exercise Price”). The Rights become exercisable in the event any person or group acquires 10% (or 20% in the case of certain institutional investors who report their holdings on Schedule 13G) or more of the Common Shares without the approval of the Board, and until such time are inseparable from and trade with the Company's common stock. The Rights have a de minimus fair value. The Rights Agreement expires November 5, 2015.

On November 28, 2011, the Company issued 2.9 million shares of common stock upon the closing of a public offering for $200 million net of issuance costs of $0.5 million.

Preferred Stock

In 2012, the Company designated 1,000,000 shares of its preferred stock with par value of $0.001 per share as Series A Participating Preferred Stock. The remaining 9,000,000 shares of preferred stock with par value of $0.001 remain undesignated. None of the preferred shares were issued and outstanding at December 31, 2012 and 2011.

Voting Rights

The holders of each share of common stock shall be entitled to one vote per share on all matters to be voted upon by the Company’s stockholders.

Stock Option Plans

In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of December 31, 2012, 4.0 million shares were reserved for future grants under the 2011 Stock Plan.

In February 2002, the Company adopted the 2002 Stock Plan, which was amended and restated in May 2006. The 2002 Stock Plan provided for the grant of incentive stock options to employees and for the grant of non-statutory stock options and stock purchase rights to employees, directors and consultants. In the first quarter of 2012, 1.2 million shares reserved for future grants under the 2002 Stock Plan expired.

A summary of the activities related to the Company’s stock option plans is as follows:

	Shares Available for Grant		Options Outstanding				Weighted- Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
			Number of Shares		Weighted- Average Exercise Price
Balances as of December 31, 2009	2,591,267		4,241,438		$	22.74
Granted	(552,765	)	552,765		99.58
Exercised	—		(1,902,073	)	24.75
Balances as of December 31, 2010	2,038,502		2,892,130		36.11
Authorized	5,700,000		—		—
Granted	(724,994	)	724,994		154.09
Exercised	—		(659,370	)	29.11
Balances as of December 31, 2011	7,013,508		2,957,754		66.59
Granted	(1,803,798	)	1,803,798		73.94
Exercised	—		(188,552	)	21.85
Canceled	48		(48	)	35.95
Expired	(1,160,721	)	—
Balances as of December 31, 2012	4,049,037		4,572,952		71.33		7.05	$	163,975
Vested and exercisable at December 31, 2012			4,572,952		71.33		7.05	$	163,975

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2012 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2012. This amount changes based on the fair market value of the Company’s common stock. Total intrinsic value of options exercised for the years ended December 31, 2012, 2011 and 2010 was $14.7 million, $128.1 million and $176.0 million, respectively.

Cash received from option exercises for the years ended December 31, 2012, 2011 and 2010 was $4.1 million, $19.6 million and $47.1 million, respectively.

Employee Stock Purchase Plan

In February 2002, the Company adopted the 2002 ESPP under which employees purchased common stock of the Company through accumulated payroll deductions. The purchase price of the common stock acquired by the employees participating in the ESPP is 85% of the closing price on either the first day of the offering period or the last day of the purchase period, whichever was lower. Under the ESPP, the offering and purchase periods took place concurrently in consecutive six month increments. Therefore, the look-back for determining the purchase price was six months. Employees could invest up to 15% of their gross compensation through payroll deductions. In no event was an employee permitted to purchase more than 8,334 shares of common stock during any six-month purchase period.

As of December 31, 2012, there were 2,785,721 shares available for future issuance under the 2002 Employee Stock Purchase Plan. The Company’s ESPP was suspended in 2011 and there were no offerings in 2011 or 2012.

During the year ended December 31, 2010 employees purchased approximately 46,112 shares at an average price of $58.41 per share. Cash received from purchases under the ESPP for the year ended December 31, 2010 was $2.7 million.

Stock-Based Compensation

Vested stock options granted before June 30, 2004 can be exercised up to three months following termination of employment. Vested stock options granted after June 30, 2004 and before January 1, 2007 can be exercised up to one year following termination of employment. Vested stock options granted after January 2007 will remain exercisable for the full ten years contractual term regardless of employment status. The following table summarizes the assumptions used to value option grants using the lattice-binomial model:

	Year Ended December 31,
	2012		2011		2010
Dividend yield	—	%	—	%	—	%
Expected volatility	55 % - 65%		51% – 65%		46% – 54%
Risk-free interest rate	1.61% - 2.01%		2.05% – 3.42%		2.65% – 3.67%
Suboptimal exercise factor	2.26 - 3.65		2.17 – 3.64		1.78 – 3.28

The Company bifurcates its option grants into two employee groupings (executive and non-executive) based on exercise behavior and considers several factors in determining the estimate of expected term for each group, including the historical option exercise behavior, the terms and vesting periods of the options granted.

The assumptions used in the Black-Scholes option pricing model to value the shares under the ESPP in 2010 was a 0% dividend yield, 45% expected volatility, 0.24% risk-free interest rate, and 0.5 expected life in years.

The Company estimates expected volatility based on a blend of historical volatility of the Company’s common stock and implied volatility of tradable forward call options to purchase shares of its common stock. The Company believes that implied volatility of publicly traded options in its common stock is expected to be more reflective of market conditions and, therefore, can reasonably be expected to be a better indicator of expected volatility than historical volatility of its common stock. The Company includes historical volatility in its computation due to low trade volume of its tradable forward call options in certain periods, there by precluding sole reliance on implied volatility.

In valuing shares issued under the Company’s employee stock option plans, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the contractual term of the options. In valuing shares issued under the Company’s ESPP, the Company bases the risk-free interest rate on U.S. Treasury zero-coupon issues with terms similar to the expected term of the shares. The Company does not anticipate paying any cash dividends in the foreseeable future and therefore uses an expected dividend yield of zero in the option valuation model. The Company does not use a post-vesting termination rate as options are fully vested upon grant date. The weighted-average fair value of employee stock options granted during 2012, 2011 and 2010 was $41.00, $84.94 and $49.31 per share, respectively. The weighted-average fair value of shares granted under the ESPP during 2010 was $21.27 per share.

Stock-based compensation expense related to stock option plans and employee stock purchases was $73.9 million, $61.6 million and $28.0 million for the years ended December 31, 2012, 2011 and 2010, respectively. The total income tax benefit recognized in the income statement related to stock option plans and employee stock purchases was $28.5 million, $22.8 million and $11.2 million for 2012, 2011 and 2010, respectively.

Stock Repurchase Program

The following table presents a summary of the Company’s stock repurchases:

	Year ended December 31,
	2011		2010
	(in thousands, except per share data)
Total number of shares repurchased	900		2,606
Dollar amount of shares repurchased	$	199,666	$	210,259
Average price paid per share	$	221.88	$	80.67
Range of price paid per share	$160.11 – $248.78		$60.23 – $126.01

Under the stock repurchase plan announced on June 11, 2010, the Company was authorized to repurchase up to $300 million of its common stock through the end of 2012. As of December 31, 2012, the Company has repurchased $259.0 million of its common stock under this plan. As of December 31, 2012, the plan has expired and the remaining $41.0 million was unused.