STOCK BASED COMPENSATION

3 Months Ended

Mar. 31, 2013

STOCK BASED COMPENSATION [Abstract]

STOCK BASED COMPENSATION

NOTE 3 — STOCK BASED COMPENSATION

Stock-based compensation cost is estimated at grant date based on the fair value of the award, and the cost is recognized as expense ratably over the vesting period. The Company uses the Black-Scholes model for estimating the grant date fair value of stock options. Determining the assumptions that enter into the model is highly subjective and requires judgment. The Company uses an expected volatility that is based on the historical volatility of its common stock. The expected life assumption is based on historical employee exercise patterns and employee post-vesting termination behavior. The risk-free interest rate for the expected term of the option is based on the average market rate on U.S. treasury securities in effect during the quarter in which the options were granted. The dividend yield reflects historical experience as well as future expectations over the expected term of the option. The Company estimates forfeitures at the time of grant and revises in subsequent periods, if necessary, if actual forfeitures differ from initial estimates.

For the three-month period ended March 31, 2013, the Company recorded total stock-based compensation expense of $1,703,000, of which $1,639,000 was related to stock options and the enrollment in the Employee Stock Purchase Plan ("ESPP"), and the remaining $64,000 was related to restricted stock awards.  In the prior year three-month period ended March 31, 2012, the Company recorded total stock-based compensation expense of $1,423,000, of which $1,419,000 was related to stock options and the ESPP, and $4,000 was related to restricted stock awards.  The Company uses the single-award method for allocating compensation cost related to stock options to each period.

Set forth below are the grant-date fair values, along with the weighted-average assumptions used in estimating those grant-date fair values, for the stock options granted during the three month periods ended March 31, 2013 and 2012:

	Three months ended March 31,
	2013			2012
Expected volatility		68.2	%		85.2	%
Expected life (in years)		4.00			4.00
Risk-free interest rate		0.84	%		0.84	%
Dividend yield		0.00	%		0.00	%
Fair value per stock option	$	6.56		$	7.88
Forfeiture rate		8	%		8	%

The table below sets forth a summary of activity within the Company's stock-based compensation plans for the quarter ended March 31, 2013:  

	Number of Options (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2012		9,727		$	4.22		2.55	$	88,918,000
Granted		36			12.77
Exercised		(177	)		1.62
Forfeited		(6	)		10.41
Outstanding at March 31, 2013		9,580		$	4.30		2.33	$	91,304,000
Exercisable at March 31, 2013		6,226		$	2.50		1.86	$	70,514,000

The aggregate intrinsic value for stock options outstanding and exercisable is defined as the difference between the market value of the Company's common stock as of the date indicated and the exercise price of the stock options.  During the quarter ended March 31, 2013, a total of 177,000 stock options were exercised resulting in cash payment to the Company of $286,000.  During the prior year quarter ended March 31, 2012, a total of 89,000 stock options were exercised resulting in cash payment to the Company of $155,000.  These option exercises during the quarters ended March 31, 2013 and 2012 generated tax-deductible expenses totaling $2,182,000 and $902,000, respectively.

The Company also may grant restricted stock awards to certain employees and members of its Board of Directors. Restricted stock awards are valued at the closing market value of the Company's common stock on the date of grant and the total value of the award is recognized as expense ratably over the vesting period of the grants. The Company did not grant restricted stock awards during the quarters ended March 31, 2013 or March 31, 2012.  The Company recognized compensation expense of $64,000 and $4,000 during the quarters ended March 31, 2013 and 2012, respectively, related to outstanding restricted stock awards.

The following is a summary of non-vested restricted stock activity:

	Number of Shares		Weighted Average
	(in thousands)		Grant Date Fair Value
Non-vested at December 31, 2012		18	$	14.63
Granted		—		—
Forfeited		—		—
Vested		—		—
Non-vested at March 31, 2013		18	$	14.63