EQUITY-BASED COMPENSATION

6 Months Ended

Jun. 30, 2012

EQUITY-BASED COMPENSATION [Abstract]

EQUITY-BASED COMPENSATION

7. 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 advisors 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. 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,
	2012			2011			2012			2011
Cost of revenues	$	148		$	68		$	267		$	68
Selling and marketing		424			282			784			546
Research and development		135			116			276			325
General and administrative		1,395			1,329			2,857			2,648
Equity-based compensation expense		2,102			1,795			4,184			3,587
Income tax benefits		(736	)		(628	)		(1,464	)		(1,255	)
Total equity-based compensation expense, net of tax	$	1,366		$	1,167		$	2,720		$	2,332

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 cancelled. 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 restricted stock awards under our stock plans from December 31, 2011 to June 30, 2012:

	Shares	Weighted- Average Grant Date Fair Value
Unvested at December 31, 2011	1,742,920	$	8.14
Granted	379,223	8.95
Vested	(534,578)	8.80
Forfeited	-	-
Unvested at June 30, 2012	1,587,565	$	8.12

The weighted-average grant date fair value of restricted stock awards granted during the six months ended June 30, 2012 and 2011 was $8.95 and $7.57, respectively. The aggregate fair value of restricted stock vested was $1.8 million and $4.7 million for the three and six months ended June 30, 2012, respectively and $1.4 million and $3.6 million for the three and six months ended June 30, 2011, respectively. During the six months ended June 30, 2012 and the year ended December 31, 2011, we issued 373,711 and 521,840 shares, respectively, of our common stock relating to the vesting of restricted stock awards. As of June 30, 2012, we had $10.1 million of unvested restricted stock, which we will recognize over a weighted-average recognition period of 2.19 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, 2011 to June 30, 2012:

	Options			Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Options outstanding at December 31, 2011		227,835		$	9.98
Granted		-			-
Exercised		(100,000	)		8.53
Expired		(31,500	)		11.53
Options outstanding and exercisable at June 30, 2012		96,335		$	10.98		1.0	$	525

As of each of June 30, 2012 and 2011, we had no remaining unvested stock options to be recorded as an expense for future periods. During the six months ended June 30, 2012 and the year ended December 31, 2011, we issued 100,000 and 75,000 shares of our common stock, respectively, as a result of options exercised.