EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

NOTE 7—EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

The following table sets forth the computation of Basic and Diluted earnings per share:

	Three Months Ended September 30,
	2012				2011
	Basic		Diluted		Basic			Diluted
	(In thousands, except per share data)
Numerator:
Income (loss) from continuing operations	$	270	$	270	$	(3,406	)	$	(3,406	)
Income from discontinued operations, net of tax	4,112		4,112		16,721			16,721
Net income attributable to common shareholders	$	4,382	$	4,382	$	13,315		$	13,315
Denominator:
Weighted average common shares	11,389		12,003		11,037			11,037
Income (loss) per share:
Income (loss) from continuing operations	$	0.02	$	0.02	$	(0.31	)	$	(0.31	)
Income from discontinued operations, net of tax	0.36		0.35		1.52			1.52
Net income per common share	$	0.38	$	0.37	$	1.21		$	1.21

	Nine Months Ended September 30,
	2012						2011
	Basic			Diluted			Basic			Diluted
	(In thousands, except per share data)
Numerator:
Loss from continuing operations	$	(4,752	)	$	(4,752	)	(44,608		)	(44,608		)
Income (loss) from discontinued operations, net of tax	49,058			49,058			(16,077		)	(16,077		)
Net income (loss) available to common shareholders	$	44,306		$	44,306		$	(60,685	)	$	(60,685	)
Denominator:
Weighted average common shares	11,293			11,293			10,978			10,978
Income (loss) per share:
Loss from continuing operations	$	(0.42	)	$	(0.42	)	$	(4.06	)	$	(4.06	)
Income (loss) from discontinued operations, net of tax	4.34			4.34			(1.47		)	(1.47		)
Net income (loss) per common share	$	3.92		$	3.92		$	(5.53	)	$	(5.53	)

The sum of the first, second, and third quarters of 2012 diluted earnings per share from discontinued operations does not equal the year-to-date total due to a revision of approximately $0.03 per share to the first quarter amount. The impact of this correction is considered immaterial to the previously reported financial statements.

For the nine months ended September 30, 2012 and the three and nine months ended September 30, 2011, we had losses from continuing operations and, as a result, no potentially dilutive securities were included in the denominator for computing diluted earnings per share because the impact would have been anti-dilutive. Accordingly, the weighted average basic shares outstanding were used to compute earnings per share amounts for these periods. For the three and nine months ended September 30, 2012, approximately 0.3 million and 2.1 million shares, respectively, related to potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. For the three and nine months ended September 30, 2011, approximately 1.9 million shares related to potentially dilutive securities were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive.

Non-cash compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of operations for the three and nine months ended September 30, 2012 and 2011 (in thousands):

	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
Cost of revenue	$	2	$	(1	)	$	6	$	3
Selling and marketing expense	145		50			504		314
General and administrative expense	1,026		712			2,662		2,196
Product development	136		63			393		218
Non-cash compensation expense	$	1,309	$	824		$	3,565	$	2,731

The forms of stock-based awards granted to our employees are principally restricted stock units (“RSUs”), restricted stock and stock options. RSUs are awards in the form of units, denominated in a hypothetical equivalent number of shares of our common stock and with the value of each award equal to the fair value of our common stock at the date of grant. RSUs may be settled in cash, stock or both, as determined by the compensation committee of our board of directors at the time of grant. Each stock-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Certain restricted stock awards also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. We recognize expense for all stock-based awards for which vesting is considered probable. For stock-based awards, the accounting charge is measured at the grant date as the fair value of the shares of our common stock subject to the award and expensed ratably as non-cash compensation over the vesting term. For performance-based awards, the expense is measured at the grant date as the fair value of the shares of our common stock subject to the award and expensed as non-cash compensation over the vesting period if the performance targets are considered probable of being achieved.

The amount of stock-based compensation expense recognized in the consolidated statement of operations is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if the actual forfeiture rate differs from the estimated rate.

A summary of changes in outstanding stock options for the nine months ended September 30, 2012 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(In years)	(In thousands)
Outstanding at January 1, 2012	1,046,746		$	9.09
Granted	150,000		7.43
Exercised	(79,660	)	7.49
Forfeited	—		—
Expired	(26,635	)	10.33
Outstanding at September 30, 2012	1,090,451		$	8.95	5.9	$	3,422
Options exercisable at September 30, 2012	248,021		$	12.26	4.2	$	513

The following table summarizes the information about stock options outstanding and exercisable as of September 30, 2012:

	Options Outstanding				Options Exercisable
Range of Exercise Prices	Outstanding at September 30, 2012	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Exercisable at September 30, 2012	Weighted Average Exercise Price
$.01 to $4.99	4,363	1.0	$	3.22	4,363	$	3.22
$5.00 to $7.45	306,821	8.9	6.65		54,241	5.92
$7.46 to $9.99	635,597	5.3	8.42		45,747	7.63
$10.00 to $14.99	16,117	2.0	12.37		16,117	12.37
$15.00 to $19.99	80,890	2.7	15.02		80,890	15.02
$20.00 to $24.99	46,663	2.7	20.19		46,663	20.19
	1,090,451	5.9	$	8.95	248,021	$	12.26

Included in the table above, on March 1, 2012 our Chairman and CEO was granted an option to purchase up to 150,000 shares of our common stock that vests in three equal installments beginning on March 1, 2013. The weighted average exercise price and the weighted average fair value related to this stock option were $7.43 and $3.63, respectively.

Nonvested RSUs and restricted stock outstanding as of September 30, 2012 and changes during the nine months ended September 30, 2012 were as follows:

	RSUs				Restricted Stock
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012	933,051		$	6.48	299,642		$	6.70
Granted	343,218		11.09		—		—
Vested	(318,429	)	7.19		(112,142	)	5.45
Forfeited	(104,495	)	6.68		—		—
Nonvested at September 30, 2012	853,345		$	8.09	187,500		$	7.44