Stockholders' Equity

6 Months Ended

Jun. 30, 2011

Stockholders' Equity

Stockholders' Equity

7. Stockholders' Equity

Stock Repurchases

Under the current stock repurchase plan, announced on June 11, 2010, the Company is authorized to repurchase up to $300.0 million of its common stock through the end of 2012. During the three months ended June 30, 2011, the Company repurchased 216,000 shares at an average price of $238 per share for an aggregate amount of $51.4 million. As of June 30, 2011, $80.6 million of this authorization is remaining. The timing and actual number of shares repurchased will depend on various factors including price, corporate and regulatory requirements, debt covenant requirements, alternative investment opportunities and other market conditions.

Shares repurchased by the Company are accounted for when the transaction is settled. As of June 30, 2011, there were no unsettled share repurchases. Shares repurchased and retired are deducted from common stock for par value and from additional paid-in capital for the excess over par value. If additional paid- in capital has been exhausted, the excess over par value is deducted from retained earnings. Direct costs incurred to acquire the shares are included in the total cost of the shares. For the three and six months ended June 30, 2011, $10.2 million and $33.1 million, respectively, were deducted from retained earnings related to share repurchases.

Stock-Based Compensation

A summary of the activity related to the Company's stock option plans during the six months ended June 30, 2011 is as follows:

				Options Outstanding
	Shares Available for Grant			Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)		Aggregate Intrinsic Value (in Thousands)
Balances as of December 31, 2010		2,038,502			2,892,130		$	36.11
Granted		(227,578	)		227,578			225.01
Exercised		—			(472,144	)		30.03
Balances as of June 30, 2011		1,810,924			2,647,564			53.43		5.90	$	554,194
Vested and exercisable at June 30, 2011					2,647,564			53.43		5.90	$	554,194

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 the second quarter of 2011 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 June 30, 2011. This amount changes based on the fair market value of the Company's common stock. Total intrinsic value of options exercised for the three months ended June 30, 2011 and 2010 was $49.3 million and $33.1 million, respectively. Total intrinsic value of options exercised for the six months ended June 30, 2011 and 2010 was $93.4 million and $55.9 million, respectively.

The following table summarizes the assumptions used to value stock option grants using the lattice-binomial model:

	Three Months Ended		Six Months Ended
	June 30, 2011	June 30, 2010	June 30, 2011	June 30, 2010
Dividend yield	0%	0%	0%	0%
Expected volatility	51%	52%	51%-52%	46%-52%
Risk-free interest rate	3.35%	3.67%	3.35%-3.42%	3.67%
Suboptimal exercise factor	2.22-3.54	1.97-2.30	2.17-3.54	1.78-2.30

In the first and second quarters of 2011, the Company used a suboptimal exercise factor of 3.39 and 3.54, respectively, for executives and 2.17 and 2.22, respectively, for non-executives, resulting in a calculated expected life of the option grants of eight years for executives and five years for non-executives. In the first and second quarters of 2010, the Company used a suboptimal exercise factor of 2.15 and 2.30, respectively, for executives and 1.78 and 1.97, respectively, for non-executives, resulting in a calculated expected life of the option grants of five years for executives and four years for non-executives.

The weighted-average fair value of employee stock options granted during the three months ended June 30, 2011 and 2010 was $134.77 and $45.08 per share, respectively. The weighted-average fair value of employee stock options granted during the six months ended June 30, 2011 and 2010 was $122.16 and $35.24 per share, respectively.

The following table summarizes the assumptions used to value employee stock purchase rights for the offering period commencing in May 2010, using the Black Scholes option pricing model. There were no ESPP offerings in 2011, and the Company does not expect any future ESPP offerings.

	Three Months Ended June 30, 2010
Dividend yield		0	%
Expected volatility		45	%
Risk-free interest rate		0.24	%
Expected life (in years)		0.5

Cash received from the issuance of common stock for the three months ended June 30, 2011 and 2010 was $7.4 million and $13.1 million, respectively. Cash received from the issuance of common stock for the six months ended June 30, 2011 and 2010 was $14.2 million and $23.0 million, respectively.

The following table summarizes stock-based compensation expense, net of tax, related to stock option plans and employee stock purchases for the three and six months ended June 30, 2011 and 2010 which was allocated as follows:

	Three Months Ended						Six Months Ended
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010
	(in thousands)
Fulfillment expense	$	679		$	307		$	1,240		$	483
Technology and development		7,005			2,376			12,297			4,245
Marketing		1,485			756			2,734			1,399
General and administrative		6,367			3,489			11,529			6,303
Stock-based compensation expense before income taxes		15,536			6,928			27,800			12,430
Income tax benefit		(5,973	)		(2,820	)		(10,720	)		(5,054	)
Total stock-based compensation expense after income taxes	$	9,563		$	4,108		$	17,080		$	7,376