Note 6 - Stockholders' Equity

12 Months Ended

Dec. 31, 2011

Stockholders' Equity Note Disclosure [Text Block]

6.  Stockholders’ Equity

The Company has two stock option plans and an employee stock purchase plan—the 1998 Stock Option Plan, the 2004 Equity Incentive Plan and the 2004 Employee Stock Purchase Plan. The Company recognized stock-based compensation expenses for the years ended December 31, 2011, 2010 and 2009, as follows (in thousands):

	Year ended December 31,
	2011			2010			2009
Non-Employee	$	13		$	(7	)	$	118
ESPP		538			609			671
Restricted Stock		7,216			8,271			3,353
Stock Options		5,369			7,937			10,469
Tax Benefit		(114	)		(331	)		(201	)
	$	13,022		$	16,479		$	14,410

1998 Stock Option Plan  

Under the Company’s 1998 Stock Option Plan (the 1998 Plan), the Company reserved 11,807,024 shares of common stock for issuance to the Company’s employees, directors and consultants. Options granted under the 1998 Plan have a maximum term of ten years and generally vest over four years at the rate of 25 percent one year from the date of grant and 1/48th monthly thereafter. On November 19, 2004, the effective date of the Company’s initial public offering, the 1998 Plan was terminated for future grants and the remaining 1,392,750 shares available for grant were moved to the Company’s 2004 Equity Incentive Plan (the 2004 Plan). In addition, throughout the year, shares underlying options from the 1998 Plan that are cancelled (for example, upon termination of service) are transferred to the 2004 Plan based on the number of cancellations that occur throughout the year.

2004 Equity Incentive Plan

The Company’s Board of Directors adopted the Company’s 2004 Equity Incentive Plan in March 2004, and the Company’s stockholders approved it in November 2004. Options granted under the 2004 Plan have a maximum term of ten years. New hire grants generally vest over four years at the rate of 25 percent one year from the date of grant and 1/48th monthly thereafter. Refresh grants generally vest over four years at the rate of 50 percent two years from the date of grant and 1/48th monthly thereafter. There were 800,000 shares initially reserved for issuance under the 2004 Plan. The 2004 Plan provides for annual increases in the number of shares available for issuance beginning on January 1, 2005 equal to the least of: 5% of the outstanding shares of common stock on the first day of the year, 2,400,000 shares, or a number of shares determined by the Board of Directors. The following is a summary of the 2004 Plan, which includes stock options and restricted stock awards and units:

Available for Grant as of December 31, 2010	2,954,607
2011 Additions to Plan	1,753,151
2011 Grants	(1,005,980	)
2011 Cancellations	589,959
Available for Grant as of December 31, 2011	4,291,737

A summary of the status of the Company’s stock option plans at December 31, 2011, 2010 and 2009 and changes therein are presented in the table below: 

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2008 (3,766,630 options exercisable at a weighted-average exercise price of $8.26 per share)		8,196,637		$	12.62		5.91	$	20,193,958
Options granted (weighted-average fair value of $8.42 per share)		706,000		$	17.52
Options exercised		(1,217,272	)	$	9.19
Options forfeited and expired		(274,451	)	$	17.27
Outstanding at December 31, 2009		7,410,914		$	13.48		5.04	$	77,918,848
Options granted (weighted-average fair value of $8.95 per share)		370,500		$	19.92
Options exercised		(1,452,245	)	$	9.87
Options forfeited and expired		(494,051	)	$	15.67
Outstanding at December 31, 2010 (4,264,268 options exercisable at a weighted-average exercise price of $13.33 per share)		5,835,118		$	14.61		4.30	$	19,035,591
Options granted (weighted-average fair value of $5.85 per share)		152,500		$	13.96
Options exercised		(685,417	)	$	6.85
Options forfeited and expired		(438,962	)	$	18.66
Outstanding at December 31, 2011		4,863,239		$	15.31		3.44	$	8,817,049
Options exercisable at December 31, 2011 and expected to become exercisable		4,818,395		$	15.30		3.42	$	8,780,785
Options vested and exercisable at December 31, 2011		4,202,786		$	15.05		3.22	$	8,386,320

The following summarizes information as of December 31, 2011 concerning outstanding and exercisable options:

	Options Outstanding						Options Exercisable
Range of Exercises Prices	Number of Options Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of Options Exercisable		Weighted Average Exercise Price
$0.80 - $9.32		638,959		2.71	$	6.15		638,959	$	6.15
$9.34 - $12.86		564,110		3.01	$	11.61		512,067	$	11.62
$12.99 - $13.53		529,538		3.48	$	13.09		433,914	$	13.08
$13.60 - $15.64		580,831		3.75	$	15.14		474,836	$	15.27
$15.67 - $15.74		563,500		3.84	$	15.74		443,332	$	15.74
$15.85 - $17.36		500,748		3.31	$	16.36		437,543	$	16.32
$17.39 - $19.91		512,303		3.46	$	18.71		464,101	$	18.62
$20.06 - $22.19		502,625		3.80	$	20.89		429,553	$	20.88
$22.26 - $25.14		403,625		3.86	$	23.23		309,856	$	23.24
$25.84 - $25.84		67,000		3.46	$	25.84		58,625	$	25.84
		4,863,239						4,202,786

The total fair value of options that vested was $5.4 million, $7.9 million and $10.5 million, respectively, for the years ended December 31, 2011, 2010 and 2009. Total intrinsic value of options exercised was $5.8 million, $17.4 million and $15.0 million, respectively, for the years ended December 31, 2011, 2010 and 2009. The net cash proceeds from the exercise of stock options were $4.7 million, $14.3 million and $11.2 million, respectively, for the years ended December 31, 2011, 2010 and 2009. At December 31, 2011, unamortized compensation expense related to unvested options was approximately $4.2 million. The weighted average period over which compensation expense related to these unvested options will be recognized is approximately 1.8 years.

The employee stock-based compensation expense recognized under ASC 718-10-30 Compensation – Stock Compensation – Overall – Initial Measurement, was determined using the Black-Scholes option pricing model. Option pricing models require the input of subjective assumptions and these assumptions can vary over time. The Company used the following weighted-average assumptions to determine the fair value of the awards granted during the respective periods: 

	2011			2010			2009
Expected term (years)		4.1			4.1			4.1
Expected volatility		52.9	%		55.9	%		60.7	%
Risk-free interest rate		1.1	%		1.8	%		1.8	%
Dividend yield		-			-			-

In estimating the expected term, the Company considers its historical stock option exercise experience, post vesting cancellations and remaining contractual term of the options outstanding. In estimating the expected volatility, the Company uses its own historical data to determine its estimated expected volatility. The Company uses the U.S. Treasury yield for its risk-free interest rate and a dividend yield of zero as it does not issue dividends. The Company applies a forfeiture rate that is based on options that have been forfeited historically.

Restricted Stock

A portion of the Company’s shares of common stock were issued under restricted stock purchase agreements. Under these agreements, in the event of a termination of an employee, the Company has the right to repurchase the common stock at the original issuance price of $0.001. The repurchase right expires over a 4-year period. A summary of our restricted stock awards is presented in the table below: 

	Restricted Stock Awards			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2008		70,377		$	11.55		0.48
Awards released		(57,577	)		11.29
Awards forfeited		(6,250	)		8.64
Outstanding at December 31, 2009		6,550		$	16.62		0.14
Awards released		(6,550	)		16.62
Outstanding at December 31, 2010		-		$	-		-
Outstanding at December 31, 2011		-		$	-		-

The Company also grants restricted stock units, which vest generally over two to four years as determined by the Company’s Compensation Committee, and are issued upon vesting. A summary of the restricted stock units is presented in the table below:

	Restricted Stock Units			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Recognition Period (Years)
Outstanding at December 31, 2008		389,643		$	18.11		2.72
Awards granted		54,200			20.93
Awards released		(146,447	)		18.11
Awards forfeited		(7,500	)		16.66
Outstanding at December 31, 2009		289,896		$	18.67		2.22
Awards granted		934,240			20.05
Awards released		(230,874	)		19.24
Awards forfeited		(33,088	)		18.38
Outstanding at December 31, 2010		960,174		$	19.88		2.91
Awards granted		853,480			14.40
Awards released		(413,101	)		18.51
Awards forfeited		(100,997	)		18.95
Outstanding at December 31, 2011		1,299,556		$	16.87		2.71

The total fair value of restricted stock awards and units that vested was $8.7 million, $5.5 million and $2.7 million for the years ended December 31, 2011, 2010 and 2009, respectively. The intrinsic value related to restricted stock awards and units released for the years ended 2011, 2010 and 2009 was $5.8 million, $4.5 million and $3.8 million, respectively. The total intrinsic value of restricted units outstanding at December 31, 2011, 2010 and 2009 were $19.6 million, $15.9 million and $7.1 million, respectively. At December 31, 2011, unamortized compensation expense related to unvested restricted stock units was approximately $14.3 million with a weighted average remaining recognition period of 2.7 years.

On February 25, 2010, the Board granted 416,000 performance units to the Company’s executive officers. These performance units generally vest over four years, with a graded acceleration feature that allows all or a portion of these awards to be accelerated if certain performance conditions are satisfied. The amount of shares to be accelerated is based on achieving certain performance targets, with the minimal acceleration occurring if performance exceeds at least 110% of non-GAAP earnings per share as set forth in the Company’s annual operating plan approved by the Board, as determined by the Compensation Committee in its sole discretion. The Compensation Committee has the discretion not to accelerate any shares, if it so chooses, even if the performance targets are met. To date, none of the shares have been accelerated and it is too early to ascertain whether certain of the shares will be accelerated in 2012 and beyond.

2004 Employee Stock Purchase Plan

Under the 2004 Employee Stock Purchase Plan (the Purchase Plan), eligible employees may purchase common stock through payroll deductions. Participants may not purchase more than 2,000 shares in a six-month offering period or stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period in accordance with the Internal Revenue Code and applicable Treasury Regulations. A total of 200,000 shares of common stock were reserved for issuance under the Purchase Plan.  The Purchase Plan provides for an automatic annual increase beginning on January 1, 2005 by an amount equal to the least of 1,000,000 shares; 2% of the outstanding shares of common stock on the first day of the year; or a number of shares as determined by the Board of Directors. For the years ended December 31, 2011, 2010 and 2009, 149,981 shares, 114,387 shares and 161,026 shares, respectively, were issued under the Purchase Plan. The following is a summary of the Purchase Plan and changes during the year ended December 31, 2011:

Available Shares as of December 31, 2010	3,141,931
2011 Additions to Plan	701,260
2011 Purchases	(149,981	)
Available Shares as of December 31, 2011	3,693,210

The Purchase Plan is considered compensatory under ASC 718-50-25-2 Compensation – Stock Compensation – Employee Share Purchase Plans – Recognition, and is accounted for in accordance with ASC 718-50-30-2 Compensation – Stock Compensation – Employee Share Purchase Plans – Initial Measurements – Look-Back Plans. The intrinsic value for stock purchased was $0.3 million, $0.3 million and $1.0 million for the years ended December 31, 2011, 2010 and 2009, respectively. The unamortized expense as of December 31, 2011 was $0.1 million, which will be recognized over 0.1 years. The Black-Scholes option pricing model was used to value the employee stock purchase rights. For the years ended December 31, 2011, 2010 and 2009, the following assumptions were used in the valuation of the stock purchase rights:

	2011			2010			2009
Expected term (years)		0.5			0.5			0.5
Expected volatility		39.2	%		39.5	%		79.8	%
Risk-free interest rate		0.1	%		0.2	%		0.4	%
Dividend yield		-			-			-

Cash proceeds from employee stock purchases for the year ended December 31, 2011, 2010 and 2009 was $1.8 million, $1.9 million and $1.8 million, respectively.