Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation

Stock-Based Compensation

Note 6. Stock-Based Compensation

The Company recorded employee stock-based compensation expense of $3.7 million and $7.4 million for the three and six months ended June 30, 2012, respectively, and $3.0 million and $5.9 million of employee stock-based compensation expense for the three and six months ended June 30, 2011, respectively, including expense for stock option grants, restricted stock unit (“RSU”) awards, restricted stock (“RS”) awards and stock purchased under the Company’s Employee Stock Purchase Plan (“ESPP”). Employee stock-based compensation expense was calculated based on options and awards ultimately expected to vest and has been reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Employee stock-based compensation expense includes expense related to stock options and RSUs granted to outside directors of the Company as well as stock purchased under the ESPP.

Stock Option Grants

The Company granted options to purchase 62,000 shares and 566,500 shares of common stock to employees and outside directors during the three and six months ended June 30, 2012, respectively, and 69,500 and 548,900 shares of common stock to employees and outside directors during the three and six months ended June 30, 2011, respectively. For the three and six months ended June 30, 2012, the Company issued 308,049 and 532,288 shares of common stock in connection with the exercise of stock options with a weighted-average exercise price of $15.07 and $15.72 per share, respectively. For the three and six months ended June 30, 2011, the Company issued 189,187 and 425,546 shares of common stock in connection with the exercise of stock options with a weighted-average exercise price of $12.66 and $12.94 per share, respectively.

Restricted Stock Units/Restricted Stock

During the three and six months ended June 30, 2012, the Company awarded 35,344 and 386,892 RSU and RS with a grant-date fair value equal to $1.1 million and $11.2 million, respectively. Each RSU/RS entitles the recipient to receive one share of the Company’s common stock upon vesting. Awards during the three and six months ended June 30, 2012 included 34,040 and 384,016 RSUs awarded to employees, and 1,304 and 2,876 RS shares awarded to outside directors serving on the Company’s board, respectively. During the three and six months ended June 30, 2011, the Company awarded 2,030 RS shares to outside directors serving on the Company’s board, with a grant-date fair value equal to $53,000. RSUs awarded to employees generally vest as to one-third of the total number of shares awarded annually over a three-year period. RS awarded to outside directors are in lieu of fees paid for service as a director and vest immediately on the award date. During the three and six months ended June 30, 2012, the Company issued 3,880 and 64,966 shares of common stock, respectively, in connection with the vesting of RSUs and RS with a weighted-average grant date fair value of $28.48 and $23.42 per share, respectively. During the three and six months ended June 30, 2011, the Company issued 2,030 shares of common stock in connection with RS awards to outside directors with a weighted-average grant date fair value of $26.15 per share. There were no shares issued in connection with the vesting of employee RSUs for the three and six months ended June 30, 2011, respectively.

Employee Stock Purchase Plan

During the three and six months ended June 30, 2012, 69,856 shares were issued under the ESPP. A total of 1,250,000 shares of common stock have been reserved for issuance under the ESPP, of which 1,180,144 shares were available for issuance as of June 30, 2012. As of June 30, 2012, there was $431,000 of unrecognized compensation expense related to the ESPP, which is expected to be recognized over an estimated weighted-average period of five months. There were no shares issued under the ESPP during the three and six months ended June 30, 2011.

Valuation Assumptions

The Company values its stock option grants using the Black-Scholes option valuation model. Option valuation models require the input of highly subjective assumptions that can vary over time. The Company’s assumptions regarding expected volatility are based on the historical volatility of the Company’s common stock. The expected life of options granted is estimated based on historical option exercise data and assumptions related to unexercised options. The risk-free interest rate is estimated using published rates for U.S. Treasury securities with a remaining term approximating the expected life of the options granted. The Company uses a dividend yield of zero as it has never paid cash dividends and does not anticipate paying cash dividends in the foreseeable future. The weighted-average fair values and assumptions used in calculating such values during each period are as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Expected volatility:
Stock options	46		%	46		%	46		%	47		%
ESPP	44		%	—		%	46		%	—		%
Risk-free interest rate:
Stock options	1.05		%	1.97		%	1.23		%	2.30		%
ESPP	0.07		%	—		%	0.06		%	—		%
Expected life in years:
Stock options	6.83			5.71			6.83			6.20
ESPP	0.50			—			0.50			—
Weighted-average fair value:
Stock options	$	16.25		$	11.65		$	14.17		$	11.18
ESPP	$	7.48		$	—		$	7.32		$	—