STOCK BASED COMPENSATION

9 Months Ended

Sep. 30, 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 to be used in 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 of similar term in effect during the quarter in which the options were granted. The dividend yield reflects the Company’s 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 the estimate in subsequent periods, if necessary, if actual forfeitures differ from initial estimates.

The Company uses the single-award method for allocating compensation cost related to stock options to each period.  The following table sets forth the components of the Company’s stock-based compensation expense for the three and nine month periods ended September 30, 2013 and 2012 (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2013		2012		2013		2012
Stock options and employee stock purchase plan	$	1,326	$	1,590	$	5,156	$	4,762
Restricted stock awards		104		278		518		287
Total stock-based compensation expense	$	1,430	$	1,868	$	5,674	$	5,049

The weighted-average assumptions used in estimating the grant date fair value of the stock options granted during the three and nine months ended September 30, 2013 and 2012, along with the weighted-average grant date fair values, were as follows:

	Three months ended September 30,					Nine months ended September 30,
	2013		2012			2013			2012
Expected volatility		N/A		71	%		59	%		84	%
Expected life (in years)		N/A		4.0			4.0			4.0
Risk-free interest rate		N/A		0.7	%		0.74	%		0.74	%
Dividend yield		N/A		—	%		—	%		—	%
Fair value per stock option		N/A	$	7.08		$	6.77		$	7.92
Forfeiture rate		N/A		8	%		8	%		8	%

The table below sets forth a summary of activity within the Company’s stock option plan for the nine months ended September 30, 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		276			15.02
Exercised		(415	)		4.48
Forfeited		(29	)		11.26
Outstanding at September 30, 2013		9,559		$	4.50		1.88	$	145,081,000
Exercisable at September 30, 2013		7,646		$	2.94		1.19	$	128,027,000

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 three and nine month periods ended September 30, 2013, 145,000 and 415,000 stock options were exercised resulting in cash payments due to the Company of $1,183,000 and $1,859,000, respectively.  These stock option exercises generated tax-deductible expenses totaling $1,391,000 and $4,523,000, respectively.  During the three and nine month periods ended September 30, 2012, 206,000 and 295,000 stock options were exercised resulting in cash payments to the Company of $452,000 and $599,000, respectively.  These option exercises generated tax-deductible expenses totaling $2,496,000 and $3,398,000, respectively.

The Company also may grant restricted stock awards to certain employees and members of its Board of Directors (“Directors”). Restricted stock awards are valued at the closing market price of the Company’s common stock on the day of grant and the total value of the award is recognized as expense ratably over the vesting period of the grants.  On May 4, 2013, the Company granted a total of 31,899 restricted shares to members of  its Board of Directors, of which 15,946 shares vested immediately upon issuance and the remaining 15,953 shares will vest on the one-year anniversary of grant.  On September 12, 2012, the Company granted a total of 35,000 restricted shares to members of its Board of Directors, of which 17,500 vested immediately upon issuance and the remaining 17,500 vested on September 12, 2013.

        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		17	$	14.63
Granted		32	$	15.36
Forfeited		—		—
Vested		(33)	$	14.98
Non-vested at September 30, 2013		16	$	15.36