Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Expense

STOCK-BASED COMPENSATION EXPENSE

The effect of recording stock-based compensation expense for the three and six months ended June 30, 2013 and 2012 is as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Cost of revenues	$	80	$	248	$	134	$	398
Research, development and other related costs	981		1,952		2,070		3,664
Selling, general and administrative	4,064		3,013		5,468		5,207
Total stock-based compensation expense	$	5,125	$	5,213	$	7,672	$	9,269

Stock-based compensation expense categorized by various equity components for the three and six months ended June 30, 2013 and 2012 is summarized in the table below (in thousands):

	Three Months Ended				Six Months Ended
	June 30, 2013		June 30, 2012		June 30, 2013		June 30, 2012
Employee stock options	$	2,913	$	3,148	$	4,948	$	5,910
Restricted stock awards and units	1,842		1,613		1,817		2,403
Employee stock purchase plan	370		452		907		956
Total stock-based compensation expense	$	5,125	$	5,213	$	7,672	$	9,269

The Company uses the Black-Scholes option pricing model to determine the estimated fair value of stock-based awards. The fair value of each option grant is determined on the date of grant and the expense is recorded on a straight-line basis. The assumptions used in the model include expected life, volatility, risk-free interest rate, and dividend yield. The Company’s determinations of these assumptions are outlined below.

Expected life – The expected life assumption is based on analysis of the Company’s historical employee exercise patterns. The expected life of options granted under the ESPP represents the offering period of two years.

Volatility – Volatility is calculated using the historical volatility of the Company’s common stock for a term consistent with the expected life. Historical volatility of the Company’s common stock is also utilized for the ESPP.

Risk-free interest rate – The risk-free interest rate assumption is based on the U.S. Treasury rate for issues with remaining terms similar to the expected life of the options.

Dividend yield – Expected dividend yield is calculated by annualizing the cash dividend declared by the Board for the current quarter and dividing that result by the average closing price of the Company’s common stock for the quarter. Cash dividends are not paid on options, restricted stock units or unvested restricted stock awards.

In addition, the Company estimates forfeiture rates. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates. Historical data is used to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest.

The following assumptions were used to value the options granted:

	Three Months Ended				Six Months Ended
	June 30, 2013		June 30, 2012		June 30, 2013	June 30, 2012
Expected life (in years)	5.0		3.7		5.0	3.7
Risk-free interest rate	1.4	%	0.6	%	0.8 - 1.4%	0.6 - 0.8%
Dividend yield	3.5	%	2.7	%	2.3 - 3.5%	2.2 - 2.7%
Expected volatility	58.9	%	63.0	%	58.9% - 59.5%	63.0 - 66.4%