Equity

The Company accounts for stock-based compensation under the provisions of FASB ASC 718-10, Compensation — Stock Compensation (“ASC 718-10”), which requires all share-based payments to employees, including grants of employee stock options and restricted stock units, to be recognized in the income statement based on their fair values. Share-based payments that contain performance conditions are recognized when such conditions are probable of being achieved.

The Company uses the Black-Scholes option pricing model to determine the weighted-average fair value of options granted. The Company determines the intrinsic value of restricted stock and restricted stock units based on the closing price of its common stock on the date of grant. The Company recognizes the compensation expense of share-based awards on a straight-line basis for awards with only service conditions and on an accelerated method for awards with performance conditions. Compensation expense is recognized over the vesting period of the awards.

The determination of the fair value of share-based payment awards utilizing the Black-Scholes model is affected by the stock price and a number of assumptions, including expected volatility, expected life, risk-free interest rate and expected dividends. The expected life of the awards is estimated based on the midpoint scenario, which combines historical exercise data with hypothetical exercise data for outstanding options. The risk-free interest rate assumption is based on observed interest rates appropriate for the terms of the awards. The dividend yield assumption is based on Company history and expectation of paying no dividends. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Stock-based compensation expense recognized in the financial statements is based on awards that are ultimately expected to vest. The Company evaluates the assumptions used to value the awards on a quarterly basis and if factors change and different assumptions are utilized, stock-based compensation expense may differ significantly from what has been recorded in the past. If there are any modifications or cancellations of the underlying unvested securities, the Company may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense.

In July 2014, in connection with the extinguishment of $28.5 million in principal amount of 3.75% Notes, the Company issued 348,535 shares of its common stock to the holders representing the conversion premium.

The Company grants share-based awards to employees in the form of options to purchase the Company’s common stock, the ability to purchase stock at a discounted price under the employee stock purchase plan and restricted stock units. Stock-based compensation expense related to share-based awards recognized in the three month periods ended June 30, 2015 and 2014 was $4.3 million and $4.2 million, respectively, and was calculated based on awards ultimately expected to vest. Stock-based compensation expense related to share-based awards recognized in the six month periods ended June 30, 2015 and 2014 was $9.6 million and $8.6 million, respectively, and was calculated on awards ultimately expected to vest.

At June 30, 2015, the Company had $50.3 million of total unrecognized compensation expense related to unvested stock options and restricted stock units.

Stock Options

In May 2007, in conjunction with the Company's initial public offering, the Company adopted its 2007 Stock Option and Incentive Plan (the "2007 Plan"). The 2007 Plan was amended and restated in November 2008, May 2012 and May 2015 to provide for the issuance of additional shares and to amend certain other provisions. As of June 30, 2015, 841,750 shares remain available for future issuance under the 2007 Plan.

In the six months ended June 30, 2015, the Company awarded 184,500 shares of performance-based incentive stock options. The stock options were granted under the 2007 Plan and vest over a four year period from the grant date with the potential of an accelerated vesting period pursuant to the achievement of certain performance conditions.

The following summarizes the activity under the Company’s stock option plans:



	Number of Options (#)		Weighted Average Exercise Price ($)		Aggregate Intrinsic Value ($)
					(In thousands)
Balance, December 31, 2014	1,847,669		$	26.99
Granted	1,555,866		32.98
Exercised⁽¹⁾	(398,745	)	15.62		$	7,922
Canceled	(125,420	)	30.16
Balance, June 30, 2015	2,879,370		$	31.66	$	8,262
Vested, June 30, 2015⁽²⁾	869,820		$	27.05	$	6,428
Vested and expected to vest, June 30, 2015⁽²⁾⁽³⁾	2,589,255				$	8,039


⁽¹⁾	The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock as of the date of exercise and the exercise price of the underlying options.


⁽²⁾	The aggregate intrinsic value was calculated based on the positive difference between the estimated fair value of the Company’s common stock as of June 30, 2015, and the exercise price of the underlying options.


⁽³⁾	Represents the number of vested options as of June 30, 2015, plus the number of unvested options expected to vest as of June 30, 2015, based on the unvested options outstanding at June 30, 2015, adjusted for the estimated forfeiture.

At June 30, 2015 there were 2,879,370 options outstanding with a weighted average exercise price of $31.66 and a weighted average remaining contractual life of 8.4 years. At June 30, 2015 there were 869,820 options exercisable with a weighted average exercise price of $27.05 and a weighted average remaining contractual life of 6.7 years.

Employee stock-based compensation expense related to stock options in the three month periods ended June 30, 2015 and 2014 was $2.0 million and $1.3 million, respectively, and was based on awards ultimately expected to vest. Employee stock-based compensation expense related to stock options in the six months ended June 30, 2015 and 2014 was $5.0 million and $2.9 million, respectively, and was based on awards ultimately expected to vest. At June 30, 2015, the Company had $23.0 million of total unrecognized compensation expense related to stock options that will be recognized over a weighted average period of 1.4 years.

Employee Stock Purchase Plan

As of June 30, 2015 the Company had 9,713 shares contingently issued under the employee stock purchase plan (“ESPP”). As of June 30, 2014, the Company had 6,898 shares contingently issued under the ESPP. In the three and six months ended June 30, 2015 and 2014, the Company recorded no significant stock-based compensation charges related to the ESPP.

Restricted Stock Units

In the six months ended June 30, 2015, the Company awarded 635,781 restricted stock units to certain employees, which included 114,287 restricted stock units subject to the achievement of performance conditions (performance-based restricted stock units). The number of performance-based restricted stock units granted during the six months ended June 30, 2015 that are expected to vest may vary based on the Company's quarterly evaluation of the probability of the performance criteria being achieved. The Company did not recognize stock compensation expense in the six months ended 2015 as it does not expect that any of the performance-based restricted stock units granted will be earned based on its evaluation of the performance criteria at June 30, 2015. The restricted stock units were granted under the 2007 Plan and vest annually over a three year period from the grant date.

The restricted stock units granted have a weighted average fair value of $32.55 per share based on the closing price of the Company’s common stock on the date of grant. The restricted stock units granted during the six months ended June 30, 2015 were valued at approximately $20.7 million on their grant date, and the Company is recognizing the compensation expense over the vesting period. Approximately $2.3 million and $2.9 million of stock compensation expense related to the vesting of restricted stock units was recognized in the three months ended June 30, 2015 and 2014, respectively. Approximately $4.6 million and $5.7 million of stock-based compensation expense related to the vesting of restricted stock units was recognized in the six months ended June 30, 2015 and 2014, respectively. Approximately $27.3 million of the fair value of the restricted stock units remained unrecognized as of June 30, 2015 and will be recognized over a weighted average period of 1.5 years. Under the terms of the awards, the Company will issue shares of common stock on each of the vesting dates.

The following table summarizes the status of the Company’s restricted stock units:



	Number of Shares (#)		Weighted Average Fair Value ($)
Balance, December 31, 2014	746,612		$	31.40
Granted	635,781		32.55
Vested	(247,855	)	28.27
Forfeited	(185,984	)	32.67
Balance, June 30, 2015	948,554		$	32.73