EQUITY-BASED COMPENSATION

6 Months Ended

Jun. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

EQUITY-BASED COMPENSATION

EQUITY-BASED COMPENSATION

We may issue restricted stock awards, stock options, stock appreciation rights, restricted stock units and other stock-based awards to employees, directors, non-employee consultants and advisers under our amended and restated 2004 long-term incentive plan and our amended and restated 2000 directors stock plan, each plan as amended. Options issued under our 2004 plan may be either incentive stock options, which permit income tax deferral upon exercise of options, or non-qualified options not entitled to such deferral. We may only issue non-qualified options under our directors stock plan. The compensation committee of our board of directors administers these stock plans.

Equity-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized over the applicable vesting periods. Included in the expense amounts are employer related costs for taxes incurred upon vesting of awards which do not impact Additional Paid-In Capital. The following table presents total equity-based compensation expense for restricted stock awards included in the line items below in our condensed consolidated statements of operations (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Cost of revenues	$	142	$	148	$	302	$	267
Selling and marketing	539		424		1,141		784
Research and development	224		135		429		276
General and administrative	1,057		1,395		1,764		2,857
Equity-based compensation expense	$	1,962	$	2,102	$	3,636	$	4,184

Restricted Stock Awards

The fair value of restricted stock awards is the market value of the stock on the date of grant. The effect of vesting conditions that apply only during the requisite service period is reflected by recognizing compensation cost only for the restricted stock awards for which the requisite service is rendered. As a result, we are required to estimate an expected forfeiture rate, as well as the probability that performance conditions that affect the vesting of certain stock-based awards will be achieved and only recognize expense for those shares expected to vest. We estimate that forfeiture rate based on historical experience of our stock-based awards that are granted, exercised and voluntarily canceled. If our actual forfeiture rate is materially different from our estimate, the stock-based compensation expense could be significantly different from what we have recorded in the current period. Our estimated forfeiture rate for restricted stock awards is 3.0%.

The following table summarizes the activity of unvested restricted stock awards under our stock plans from December 31, 2012 to June 30, 2013:

	Shares		Weighted-Average Grant Date Fair Value
Unvested at December 31, 2012	1,764,672		$	8.50
Granted	650,490		11.10
Vested/released	(475,306	)	8.42
Forfeited	(54,165	)	8.26
Unvested at June 30, 2013	1,885,691		$	9.43

The weighted-average grant date fair value of restricted stock awards granted during the six months ended June 30, 2013 and 2012 was $11.10 and $8.95, respectively. The aggregate fair value of restricted stock vested was $1.7 million and $5.2 million for the three and six months ended June 30, 2013, respectively, and $1.8 million and $4.7 million for the three and six months ended June 30, 2012, respectively. During the six months ended June 30, 2013 and the year ended December 31, 2012, we issued 330,912 and 637,686 shares, respectively, of our common stock relating to the vesting of restricted stock awards. As of June 30, 2013, we had $14.7 million of unvested restricted stock, which we will recognize over a weighted-average recognition period of 2.3 years.

Stock Options

The fair value of stock options is estimated at the date of grant with the Black-Scholes option pricing model using various assumptions such as expected life, volatility, risk-free interest rate, dividend yield and forfeiture rates. The expected life of stock-based awards granted represents the period of time that they are expected to be outstanding and is estimated using historical data. Using the Black-Scholes option valuation model, we estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock. We base the risk-free interest rate used in the Black-Scholes option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term equal to the expected life of the award. We have not historically paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we use an expected dividend yield of zero in the Black-Scholes option valuation model. We use historical data to estimate pre-vesting option forfeitures. Stock-based compensation is recorded for only those awards that are expected to vest. No stock options have been issued since the year ended December 31, 2005.

The following table summarizes the stock options activity under our stock plans from December 31, 2012 to June 30, 2013:

	Options		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Options outstanding at December 31, 2012	87,168		$	11.23
Granted	—		—
Exercised	—		—
Expired	(74,668	)	11.33
Options outstanding and exercisable at June 30, 2013	12,500		$	10.69	1.45	$	17,225

As of June 30, 2013 and 2012, we had no remaining unvested stock options to be recorded as an expense for future periods. During the year ended December 31, 2012, we issued 109,167 shares of our common stock as a result of options exercised. No options were exercised during the six months ended June 30, 2013.