EQUITY-BASED COMPENSATION

12 Months Ended

Dec. 31, 2012

EQUITY-BASED COMPENSATION [Abstract]

EQUITY-BASED COMPENSATION

8. 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 these plans, other than the directors stock 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. The compensation committee of our board of directors administers these stock plans.

Our 2004 plan provides for a total of 8.0 million shares authorized for issuance. The maximum number of stock-based awards that we may grant under our 2004 plan during any one calendar year to any one grantee is 1.0 million shares.

Our directors stock plan provides for a total of 2.5 million shares authorized for issuance. Only non-employee directors can participate in, and we may only grant restricted stock and non-qualified stock options under, our directors plan.

Equity-based compensation expense is measured at the grant date, based on the fair value of the award, and is recognized over the vesting periods. The following table presents total equity-based compensation expense for restricted stock awards and non-qualified stock options included in the line items below in our consolidated statements of operations (in thousands):

	Years Ended December 31,
	2012			2011			2010
Cost of revenues	$	482		$	169		$	237
Selling and marketing		1,340			837			1,630
Research and development		557			538			718
General and administrative		5,695			5,213			6,012
Equity-based compensation expense		8,074			6,757			8,597
Income tax benefits		(2,826	)		(2,365	)		(3,009	)
Total equity-based compensation expense, net of tax	$	5,248		$	4,392		$	5,588

Restricted Stock

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 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 our unvested restricted stock awards under our stock plans for the year ended December 31, 2012:

	Shares			Weighted- average grant date fair value
Unvested at December 31, 2011		1,742,920		$	8.14
Granted		977,249			9.41
Vested/released		(893,747	)		8.85
Forfeited		(61,750	)		7.65
Unvested at December 31, 2012		1,764,672		$	8.50

The weighted-average grant date fair value of restricted stock awards granted during the years ended December 31, 2012, 2011 and 2010, was $9.41, $7.92 and $7.50, respectively. The aggregate fair value of restricted stock vested during the years ended December 31, 2012, 2011 and 2010, was $8.1 million, $5.5 million and $6.8 million, respectively. As of December 31, 2012, we had $11.7 million of unvested restricted stock, which we will record in our consolidated statements of operations over a weighted-average recognition period of approximately two 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 paid any cash dividends on our common stock, and we do not anticipate paying any cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero in the Black-Scholes option valuation model. Finally, 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 option activity under our stock plans for the year ended December 31, 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		(109,167	)		8.53
Expired		(31,500	)		11.53
Options outstanding and exercisable at December 31, 2012		87,168		$	11.23		0.59		4,000

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011 and 2010 was $0.0 million, $0.1 million and $0.0 million, respectively. As of December 31, 2012, we had no remaining unvested stock options to be recorded as an expense in our consolidated statements of operations for future periods.