Note 2 - Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Policy Text Block [Abstract]

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

2. Stock-Based Compensation

The Company recognized stock-based compensation expenses as follows (in thousands):

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Non-employee	$	-		$	6		$	-		$	17
Employee stock purchase plan		129			88			460			478
Restricted stock		4,894			3,447			13,800			8,508
Stock options		208			641			821			2,323
Tax benefit		(80	)		(59	)		(175	)		(172	)
	$	5,151		$	4,123		$	14,906		$	11,154

2014 Equity Incentive Plan

The Company’s Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”) in April 2013, and the Company’s stockholders approved the 2014 Plan at the Company’s Annual Meeting of Stockholders in June 2013. The 2014 Plan will become effective on November 13, 2014, the day after the 2004 Equity Incentive Plan (the “2004 Plan”) expires. Once the 2004 Plan expires, the Company will no longer be able to grant equity awards under the 2004 Plan, and any shares otherwise remaining available for future grants under the 2004 Plan will no longer be available for issuance. The 2014 Plan provides for the issuance of up to 5,500,000 shares and will expire on November 13, 2024.

2004 Equity Incentive Plan

The following is a summary of the 2004 Plan, which includes stock options, time-based restricted stock units (“RSUs”) and performance share units (“PSUs”):

Available for grants as of January 1, 2013	4,957,244
Additions to plan	1,783,664
Grants	(563,930	)
Performance awards adjustment (1)	(375,509	)
Cancellations	161,747
Available for grant as of September 30, 2013	5,963,216

(1) The performance awards adjustment reflects the change in management’s probability assessment as of September 30, 2013 of the number of PSUs that will ultimately vest. See “Restricted Stock” section for details.

Restricted Stock

A summary of the time-based RSUs and PSUs is presented in the table below:

	RSUs			Weighted Average Grant Date Fair Value Per Share		PSUs			Weighted Average Grant Date Fair Value Per Share		Total			Weighted Average Grant Date Fair Value Per Share		Weighted Average Remaining Recognition Period (Years)
Outstanding at January 1, 2013		1,098,563		$	16.96		531,185		$	18.49		1,629,748		$	17.46		2.18
Awards granted		252,388			23.74		311,542			24.35		563,930			24.08
Performance awards adjustment (1)		-			-		375,509			21.73		375,509			21.73
Awards released		(397,209	)		17.42		(206,409	)		18.90		(603,618	)		17.93
Awards forfeited		(109,822	)		17.03		(42,757	)		18.91		(152,579	)		17.55
Outstanding at September 30, 2013		843,920			18.76		969,070			21.52		1,812,990			20.24		1.88

    (1) The performance awards adjustment reflects the change in management’s probability assessment as of September 30, 2013 of the number of PSUs that will ultimately vest.

The intrinsic value related to restricted stock released for the three months ended September 30, 2013 and 2012 was $3.2 million and $3.3 million, respectively. The intrinsic value related to restricted stock released for the nine months ended September 30, 2013 and 2012 was $14.8 million and $7.7 million, respectively. The total intrinsic value of restricted stock outstanding at September 30, 2013 and December 31, 2012 was $54.9 million and $36.3 million, respectively. At September 30, 2013, unamortized compensation expense related to restricted stock was approximately $24.1 million, with a weighted-average remaining recognition period of 1.9 years.

2010 PSUs:

On February 25, 2010, the Board granted 416,000 PSUs to the Company’s executive officers (“2010 Executive PSUs”). These performance units generally vested over four years, with a graded acceleration feature that allowed all or a portion of these awards to be accelerated if certain performance conditions were satisfied. The number of shares to be accelerated was based on achieving certain performance targets as set forth in the Company’s annual operating plan approved by the Board, as determined by the Compensation Committee in its sole discretion.  In February 2013, the Compensation Committee determined that the pre-determined performance goals for the 2010 Executive PSUs were met and therefore accelerated the vesting of the remaining awards in February 2013.  

2011 CEO Awards:

The Company granted 153,000 time-based RSUs to its CEO on February 8, 2011. In the fourth quarter of 2011, the Compensation Committee proposed modifying half of the time-based RSUs to PSUs and on February 7, 2012, the Board approved the performance goals based on the Company’s 2012 revenue (“2012 Modification”). The time-based RSUs that were not modified vested over two years on a quarterly basis from February 2011 to February 2013. The PSUs vested upon achievement of the pre-determined performance goals and the CEO’s continued employment. The maximum number of PSUs the CEO could receive was 100% of the RSUs originally granted. In February 2013, the Compensation Committee determined that the pre-determined performance goals for the 2012 Modification were met and therefore the PSUs were released in February 2013.  

2012 Time-Based RSUs and PSUs:

On February 14, 2012, the Board granted 413,000 awards to the Company’s executive officers. 50% of the RSUs granted to Company’s executive officers vest over two years on a quarterly basis and 50% of the units represent a target number of RSUs awarded upon achievement of certain  goals (“2012 Executive PSUs”) for the Company’s revenue in 2013. Half of the 2012 Executive PSUs will vest if the pre-determined performance goals are met and the employee is employed by the Company when the Compensation Committee approves the release of the shares. The remainder vests over the following two years on a quarterly basis. The maximum number of 2012 Executive PSUs that can be released to an executive employee is 300% of the PSUs originally granted. The PSUs earned will be reduced by a maximum of 15% in the event that the Company’s total shareholder return (“TSR”), defined as the cumulative change in share price plus dividends, as compared to the Company’s compensation peer group, is below a specified percentile for calendar years 2012 and 2013.

Based on the Company’s revenue forecast as of September 30, 2013, the Company has determined that it is probable that it will be able to exceed the pre-determined performance goals. The Company continues to evaluate expected performance against the pre-determined goals and will adjust stock-based compensation expense accordingly.

On April 24, 2012, the Company granted 344,650 awards to its existing non-executive employees. These grants include 219,317 time-based RSUs, which generally vest over four years on a quarterly basis, and 125,333 PSUs. The PSUs will be a target number of shares awarded upon achievement of a pre-determined revenue target for the Company as a whole, certain regions or product-line divisions in 2013 (“2012 Non-Executive PSUs”). Half of the 2012 Non-Executive PSUs will vest if the pre-determined performance goals are met and the employee is employed by the Company when the Compensation Committee approves the release of the shares.  The remainder vests over the following two years on a quarterly basis. The maximum number of shares an employee may receive is 300% of the PSUs originally granted.

Based on the Company’s revenue forecast as of September 30, 2013, the Company has determined that it is probable that it will be able to achieve or exceed the pre-determined performance goals. The Company continues to evaluate expected performance against the pre-determined goals and will adjust stock-based compensation expense accordingly.

 2013 Time-Based RSUs and PSUs:

On February 5, 2013, the Board granted 293,760 awards to the Company’s executive officers. 25% of the RSUs granted to Company’s executive officers vest over two years on a quarterly basis and 75% of the units represents a target number of RSUs awarded upon achievement of certain  goals (“2013 Executive PSUs”) for the Company’s revenue in 2014. Half of the 2013 Executive PSUs will vest if the pre-determined performance goals are met and the employee is employed by the Company when the Compensation Committee approves the release of the shares. The remainder vests over the following two years on a quarterly basis. The maximum number of 2013 Executive PSUs that can be released to an executive employee is 300% of the PSUs originally granted.

On February 5, 2013, the Company granted 215,433 awards to its existing non-executive employees. These grants include 124,211 time-based RSUs, which generally vest over four years on a quarterly basis, and 91,222 PSUs. The PSUs will be a target number of shares awarded upon achievement of a pre-determined revenue target for the Company as a whole, certain regions or product-line divisions in 2014 (“2013 Non-Executive PSUs”). Half of the 2013 Non-Executive PSUs will vest if the pre-determined performance goals are met and the employee is employed by the Company when the Compensation Committee approves the release of the shares.  The remainder vest over the following two years on a quarterly basis. The maximum number of shares an employee may receive is 300% of the PSUs originally granted.

Based on the Company’s 2014 revenue forecast as of September 30, 2013, the Company has determined that it is probable that it will be able to achieve or exceed the pre-determined performance goals. The Company continues to evaluate expected performance against the pre-determined goals and will adjust stock-based compensation expense accordingly.

Stock Options

A summary of the stock option activities during the nine months ended September 30, 2013 is presented in the table below: 

	Stock Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2013 (3,603,762 options exercisable at a weighted-average exercise price of $15.59 per share)		3,813,361		$	15.62		2.56	$	25,379,573
Options granted		-			-
Options exercised		(2,106,632	)		15.50
Options forfeited and expired		(9,168	)		16.87
Outstanding at September 30, 2013		1,697,561			15.76		2.01		24,670,713
Options exercisable at September 30, 2013 and expected to become exercisable		1,693,071			15.77		2.00		24,594,612
Options vested and exercisable at September 30, 2013		1,592,588			15.82		1.85		23,044,939

Total intrinsic value of options exercised was $11.3 million and $3.6 million for the three months ended September 30, 2013 and 2012, respectively. Total intrinsic value of options exercised was $22.2 million and $9.1 million for the nine months ended September 30, 2013 and 2012, respectively. The net cash proceeds from the exercise of stock options were $16.5 million and $4.9 million for the three months ended September 30, 2013 and 2012, respectively. The net cash proceeds from the exercise of stock options were $32.7 million and $12.2 million for the nine months ended September 30, 2013 and 2012, respectively. At September 30, 2013, unamortized compensation expense related to unvested options was approximately $0.7 million. The weighted average period over which compensation expense related to these unvested options will be recognized is approximately 1.5 years.

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 the Company generally has not paid dividends. The cash dividend paid in December 2012 was a special dividend. The Company applies a forfeiture rate that is based on options that have been forfeited historically.

Employee Stock Purchase Plan

For the three months ended September 30, 2013 and 2012, 46,000 and 55,000 shares, respectively, were issued under the Employee Stock Purchase Plan (“ESPP”). For the nine months ended September 30, 2013 and 2012, 111,000 and 152,000 shares, respectively, were issued under the ESPP. The following is a summary of the ESPP and changes during the nine months ended September 30, 2013:

Available shares as of January 1, 2013	4,217,960
Additions to plan	713,466
Purchases	(111,002	)
Available shares as of September 30, 2013	4,820,424

The intrinsic value of stock purchased was $0.3 million and $0.3 million for the three months ended September 30, 2013 and 2012, respectively. The intrinsic value of stock purchased was $0.8 million and $1.0 million for the nine months ended September 30, 2013 and 2012, respectively. The unamortized expense as of September 30, 2013 was $0.2 million, which will be recognized over five months. The Black-Scholes option pricing model was used to value the employee stock purchase rights. The following assumptions were used in the valuation:

	Three months ended September 30,						Nine months ended September 30,
	2013			2012			2013			2012
Expected term (years)		0.5			0.5			0.5			0.5
Expected volatility		27.5	%		39.6	%		28.0	%		45.8	%
Risk-free interest rate		0.1	%		0.1	%		0.1	%		0.1	%
Dividend yield		-			-			-			-

Cash proceeds from employee stock purchases for the nine months ended September 30, 2013 and 2012 were $2.1 million and $1.9 million, respectively.