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Stockholders' Equity
12 Months Ended
Dec. 31, 2011
Stockholders' Equity  
Stockholders' Equity

6. Stockholders' Equity

Stock Compensation

        At December 31, 2010 and 2011, the Company had equity-based employee incentive plans. Prior to May 18, 2011, the Company utilized the 2008 Management Incentive Plan (the "2008 MIP"), 2006 Management Incentive Plan (the "2006 MIP"), 2003 Management Incentive Plan (the "2003 MIP") and 2006 Directors' Equity Compensation Plan (collectively the "Preexisting Plans") for grants of stock options, restricted stock, restricted stock units, and stock appreciation rights, to provide incentives to officers, employees and non-employee directors.

        On February 18, 2011 the board of directors of the Company approved the 2011 Management Incentive Plan ("2011 MIP"), and the 2011 MIP was approved by the Company's shareholders at the 2011 Annual Meeting of Shareholders on May 18, 2011. The 2011 MIP provides for the delivery of up to a number of shares equal to (i) 5,000,000 shares of common stock, plus (ii) the number of shares subject to outstanding awards under the Preexisting Plans which become available after shareholder approval of the 2011 MIP as a result of forfeitures, expirations, and in other permitted ways under the share recapture provisions of the 2011 MIP. Delivery of shares under "full-value" awards (awards other than options or stock appreciation rights) will be counted for each share delivered as 2.29 shares against the total number of shares reserved under the 2011 MIP. Upon shareholder approval of the 2011 MIP, no further awards were made under the Preexisting Plans, and any shares that remained available for new awards (i.e.,were not committed for outstanding awards) under the Preexisting Plans were not carried forward to the 2011 MIP.

        The 2011 MIP provides for awards of stock options, resticted stock awards ("RSAs"), restricted stock units ("RSUs"), stock appreciation rights, cash-denominated awards and any combination of the foregoing. A restricted stock unit is a notional account representing the right to receive a share of the Company's Common Stock (or, at the Company's option, cash in lieu thereof) at some future date. In general, stock options vest ratably on each anniversary over the three years subsequent to grant, and have a ten year life. RSAs generally vest on the anniversary of the grant, while RSUs vest ratably on each anniversary over the three years subsequent to grant. The 2011 MIP additionally provides for the ability of employees to purchase common stock at a discount under the employee stock purchase plan ("ESPP"). At December 31, 2011, 4,886,385 shares of the Company's common stock remain available for future grant under the Company's 2011 MIP.

Stock Options

        Summarized information related to the Company's stock options for the years ended December 31, 2009, 2010 and 2011 is as follows:

 
  2009   2010  
 
  Options   Weighted
Average
Exercise
Price
  Options   Weighted
Average
Exercise
Price
 

Outstanding, beginning of period

    4,668,490   $ 39.82     5,185,091   $ 38.19  

Granted

    1,326,694     33.00     951,072     42.70  

Forfeited

    (732,846 )   39.68     (332,105 )   40.66  

Exercised

    (77,247 )   33.38     (2,028,472 )   37.89  
                   

Outstanding, end of period

    5,185,091   $ 38.19     3,775,586   $ 39.27  
                   

 

 
  2011  
 
  Options   Weighted
Average
Exercise
Price
  Weighted
Average
Remaining
Contractual
Term
(in years)
  Aggregate
Intrinsic
Value
(in thousands)
 

Outstanding, beginning of period

    3,775,586   $ 39.27              

Granted

    1,217,958     49.30              

Forfeited

    (86,986 )   42.13              

Exercised

    (1,065,325 )   38.34              
                       

Outstanding, end of period

    3,841,233   $ 42.65     7.47   $ 26,446  
                   

Vested and expected to vest at end of period

    3,763,158   $ 42.55     7.44   $ 26,251  
                   

Exercisable, end of period

    1,720,871   $ 40.02     6.03   $ 16,268  
                   

        The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (based upon the difference between the Company's closing stock price on the last trading day of 2011 of $49.47 and the exercise price) for all in-the-money options as of December 31, 2011. This amount changes based on the fair market value of the Company's common stock.

        The total pre-tax intrinsic value of options exercised (based on the difference between the Company's closing stock price on the day the option was exercised and the exercise price) during the years ended December 31, 2009, 2010 and 2011 was $0.4 million, $18.2 million and $13.1 million, respectively.

        The weighted average grant date fair value of substantially all stock options granted during the years ended December 31, 2009, 2010 and 2011 was $8.69, $11.74, and $12.72, respectively, as estimated using the Black- Scholes-Merton option pricing model based on the following weighted average assumptions:

 
  2009   2010   2011  

Risk-free interest rate

    1.67 %   1.74 %   1.63 %

Expected life

    4 years     4 years     4 years  

Expected volatility

    30.20 %   31.70 %   29.88 %

Expected dividend yield

    0.00 %   0.00 %   0.00 %

        For the years ended December 31, 2009, 2010 and 2011, expected volatility was based on the historical volatility of the Company's stock price.

        As of December 31, 2011, there was $16.9 million of total unrecognized compensation expense related to nonvested stock options that is expected to be recognized over a weighted average remaining recognition period of 1.89 years. The total fair value of options vested during the year ended December 31, 2011 was $10.3 million.

        The benefits of tax deductions from exercises of stock options and vesting of stock awards are reported as a financing cash flow, rather than as an operating cash flow. In the years ended December 31, 2009, 2010 and 2011, approximately $2.9 million, $1.1 million and $2.0 million, respectively, of benefits of such tax deductions related to stock compensation expense were realized and as such were reported as financing cash flows. For the years ended December 31, 2009 and 2011, $2.9 million and $2.0 million, respectively, were reflected as increases to additional paid-in capital. For the year ended December 31, 2010, the change to additional paid-in capital related to tax benefits (deficiencies) was $(1.4) million which includes the $1.1 million of excess tax benefits offset by $2.5 million of tax deficiencies.

Restricted Stock Awards

        Summarized information related to the Company's nonvested RSAs for the years ended December 31, 2009, 2010 and 2011 is as follows:

 
  2009   2010   2011  
 
  Shares   Weighted
Average
Grant Date
Fair Value
  Shares   Weighted
Average
Grant Date
Fair Value
  Shares   Weighted
Average
Grant Date
Fair Value
 

Outstanding, beginning of period

    321,935   $ 42.92     28,910   $ 30.27     22,309   $ 39.23  

Awarded

    30,385     30.36     22,309     39.23     18,748     52.11  

Vested

    (319,547 )   42.97     (28,910 )   30.27     (22,309 )   39.23  

Forfeited

    (3,863 )   36.66                  
                           

Outstanding, ending of period

    28,910   $ 30.27     22,309   $ 39.23     18,748   $ 52.11  
                           

        As of December 31, 2011, there was $0.4 million of unrecognized stock compensation expense related to nonvested restricted stock awards. This cost is expected to be recognized over a weighted-average period of 0.38 years.

Restricted Stock Units

        Summarized information related to the Company's nonvested RSUs for the years ended December 31, 2009, 2010 and 2011 is as follows:

 
  2009   2010   2011  
 
  Shares   Weighted
Grant Date
Fair Value
  Shares   Weighted
Grant Date
Fair Value
  Shares   Weighted
Grant Date
Fair Value
 

Outstanding, beginning of period

    176,112   $ 38.72     184,454   $ 34.99     190,488   $ 38.43  

Awarded

    121,065     32.91     101,812     42.75     115,003     49.14  

Vested

    (73,465 )   39.16     (84,615 )   36.20     (90,853 )   37.50  

Forfeited

    (39,258 )   37.60     (11,163 )   37.97     (8,300 )   42.94  
                           

Outstanding, ending of period

    184,454   $ 34.99     190,488   $ 38.43     206,338   $ 44.63  
                           

        As of December 31, 2011, there was $3.8 million of unrecognized stock compensation expense related to nonvested restricted stock units. This cost is expected to be recognized over a weighted-average period of 1.89 years.

Common Stock Warrants

        On January 5, 2004, the Company issued 570,825 warrants to purchase common stock of the Company at a purchase price of $30.46 per share at anytime until January 5, 2011 and at an approximate fair value per warrant of $9.44 ("2004 Warrants"). As of December 31, 2010, 44,561 of these 2004 Warrants remained outstanding. In January 2011, 31,362 warrants were exercised and the remaining 13,199 warrants were forfeited. There were no warrants outstanding as of December 31, 2011.

Income per Common Share

        The following table reconciles income (numerator) and shares (denominator) used in the Company's computations of net income per share for the years ended December 31, 2009, 2010, and 2011 (in thousands, except per share amounts):

 
  2009   2010   2011  

Numerator:

                   

Net income

  $ 106,671   $ 138,659   $ 129,623  
               

Denominator:

                   

Weighted average number of common shares outstanding—basic

    35,248     33,779     30,478  

Common stock equivalents—stock options

    46     448     480  

Common stock equivalents—warrants

    52     116      

Common stock equivalents—restricted stock awards

    29     12     9  

Common stock equivalents—restricted stock units

    41     86     91  
               

Weighted average number of common shares outstanding—diluted

    35,416     34,441     31,058  
               

Net income per common share—basic

  $ 3.03   $ 4.10   $ 4.25  
               

Net income per common share—diluted

  $ 3.01   $ 4.03   $ 4.17  
               

        The weighted average number of common shares outstanding for the years ended December 31, 2009, 2010 and 2011 was calculated using outstanding shares of the Company's common stock. Common stock equivalents included in the calculation of diluted weighted average common shares outstanding for the years ended December 31, 2009, 2010 and 2011 represent stock options to purchase shares of the Company's common stock, restricted stock awards and restricted stock units, stock purchased under the ESPP and shares of common stock related to certain warrants issued on January 5, 2004.

        For the years ended December 31, 2009, 2010 and 2011, the Company had additional potential dilutive securities outstanding representing 5.2 million, 2.0 million and 1.0 million options, respectively, that were not included in the computation of dilutive securities because they were anti-dilutive for such periods. Had these shares not been anti-dilutive, all of these shares would not have been included in the net income per common share calculation as the Company uses the treasury stock method of calculating diluted shares.

Stock Repurchases

        On July 30, 2008 the Company's board of directors approved a stock repurchase plan which authorized the Company to purchase up to $200 million of its outstanding common stock through January 31, 2010. Stock repurchases under the program could be executed through open market repurchases, privately negotiated transactions, accelerated share repurchases or other means. The board of directors authorized management to execute stock repurchase transactions under the program from time to time and in such amounts and via such methods as management deemed appropriate. The stock repurchase program could be limited or terminated at any time without prior notice. Pursuant to this program, the Company made open market purchases of 3,866,505 shares of the Company's common stock at an aggregate cost of $136.0 million (excluding broker commissions) during the year ended December 31, 2008 and made open market purchases of 1,859,959 shares of the Company's common stock at an average share price of $34.39 per share for an aggregate cost of $64.0 million (excluding broker commissions) during the period January 1, 2009 through April 7, 2009, which was the date that the repurchase program was completed.

        On July 28, 2009 the Company's board of directors approved a stock repurchase plan which authorized the Company to purchase up to $100 million of its outstanding common stock through July 28, 2011. Stock repurchases under the program could be executed through open market repurchases, privately negotiated transactions, accelerated share repurchases or other means. The board of directors authorized management to execute stock repurchase transactions under the program from time to time and in such amounts and via such methods as management deemed appropriate. The stock repurchase program could be limited or terminated at any time without prior notice. Pursuant to this program, the Company made open market purchases of 782,400 shares of the Company's common stock at an average price of $32.75 per share for an aggregate cost of $25.6 million (excluding broker commissions) during the period from August 17, 2009 through December 31, 2009. Pursuant to this program, the Company made open market purchases of 1,711,881 shares of the Company's common stock at an average price of $43.46 per share for an aggregate cost of $74.4 million (excluding broker commissions) during the period January 1, 2010 through April 1, 2010, which was the date that the repurchase program was completed.

        On July 27, 2010 the Company's board of directors approved a stock repurchase plan which authorized the Company to purchase up to $350 million of its outstanding common stock through July 28, 2012. On February 18, 2011, the Company's board of directors increased the stock repurchase program by an additional $100 million. Stock repurchases under the program could be executed through open market repurchases, privately negotiated transactions, accelerated share repurchases or other means. The board of directors authorized management to execute stock repurchase transactions from time to time and in such amounts and via such methods as management deemed appropriate. The stock repurchase program could be limited or terminated at any time without prior notice. Pursuant to this program, the Company made open market purchases of 1,684,510 shares of the Company's common stock at an average price of $48.36 per share for an aggregate cost of $81.5 million (excluding broker commissions) during the period from November 3, 2010 through December 31, 2010. Pursuant to this program, the Company made open market purchases of 7,534,766 shares of the Company's common stock at an average price of $48.91 per share for an aggregate cost of $368.5 million (excluding broker commissions) during the period January 1, 2011 through November 10, 2011, which was the date the repurchase program was completed.

        On October 25, 2011 the Company's board of directors approved a stock repurchase plan which authorizes the Company to purchase up to $200 million of its outstanding common stock through October 25, 2013. Stock repurchases under the program may be executed through open market repurchases, privately negotiated transactions, accelerated share repurchases or other means. The board of directors authorized management to execute stock repurchase transactions from time to time and in such amounts and via such methods as management deems appropriate. The stock repurchase program may be limited or terminated at any time without prior notice. Pursuant to this program, the Company made open market purchases of 671,776 shares of the Company's common stock at an average price of $48.72 per share for an aggregate cost of $32.7 million (excluding broker commissions) during the period from November 11, 2011 through December 31, 2011.

        The Company made no share repurchases from January 1, 2012 through February 23, 2012.

Recent Sales of Unregistered Securities

        On January 28, 2011, the Company and Blue Shield of California ("Blue Shield") entered into a Share Purchase Agreement (the "Share Purchase Agreement") pursuant to which on January 31, 2011 Blue Shield purchased 416,840 shares of the Company's Common Stock (the "Shares") for a total purchase price of $20 million. The Shares were issued to Blue Shield, an accredited investor, in a private placement pursuant to Regulation D of the Securities Act. Blue Shield has agreed not to transfer such Shares for a two year period, except in the event of any change in control of the Company as defined in the Share Purchase Agreement. The purchase price for the Shares issued was determined taking into account the recent trading price of the Company's Common Stock on NASDAQ and the restrictions on transfer of the Shares agreed to by Blue Shield.