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Share Based Compensation | 12 Months Ended
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Dec. 31, 2012
Share Based Compensation | 5. Share Based Compensation The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company has Stock Incentive Plans (the Plans) pursuant to which the Company’s board of directors may grant stock options or restricted stock to key employees. The Company is authorized to issue grants of restricted stock and stock options to purchase up to 26,963,150 shares for the years ended December 31, 2012, 2011 and 2010, respectively. There were 854,266 additional options available for grant under the Plans at December 31, 2012. The table below summarizes the expense related to share-based payments for the years ended December 31 (in thousands):
|  | 2012 |  |  | 2011 |  |  | 2010 |
Stock options |  | $ | 10,341 |  |  | $ | 9,654 |  |  | $ | 3,775 |
Restricted stock |  |  | 8,934 |  |  |  | 12,089 |  |  |  | 22,980 |
Stock-based compensation |  | $ | 19,275 |  |  | $ | 21,743 |  |  | $ | 26,755 |
The tax benefits recorded on stock based compensation were $6.8 million, $7.2 million and $7.8 million for the years ended December 31, 2012, 2011 and 2010, respectively. The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of December 31, 2012:
|  | Unrecognized Compensation Cost |  |  | Weighted Average Period of Expense Recognition (in Years) |
Stock options |  | $ | 28,429 |  |  |  | 2.46 |
Restricted stock |  |  | 5,218 |  |  |  | 1.19 |
Total |  | $ | 33,647 |  |  |  |  |
In connection with making fair value estimates related to the Company’s stock option and restricted stock grants prior to the initial public offering, management considered various factors including third-party equity transactions and certain commonly used valuation techniques. The Company sold convertible preferred stock to third parties in 2005, 2006 and 2009. In addition, in 2007 the Company repurchased common stock and preferred stock from the holders at a negotiated value which the Company believed represented fair value. These third-party transactions served as a basis for determining the fair value of our common stock at various dates. In situations where the Company sold preferred stock that included conversion and dividend features the Company considered such features in those instruments and the fact that such instruments could not be freely traded in determining a fair value for its common stock. Generally, the Company concluded that the fair value of its common stock was 10% to 25% less than the preferred stock at the date of such third-party transactions due to the features attributable to the preferred stock holders. In periods prior to third-party transactions and in intervening periods subsequent to the third-party transactions the Company utilized various earnings and revenue multiples to estimate the fair value of its common stock or to serve as an additional factor in determining fair value. Stock Options Stock options are granted with an exercise price estimated to be equal to the fair market value on the date of grant, as authorized by the Company’s board of directors. Options granted have vesting provisions ranging from one to six years. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting. The Company issues new shares upon stock option exercises. The following summarizes the changes in the number of shares of common stock under option for the following periods (shares and aggregate intrinsic value in thousands):
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Options Exercisable at End of Year |  |  | Weighted Average Exercise Price of Exercisable Options |  |  | Weighted Average Fair Value of Options Granted During the Year |  |  | Aggregate Intrinsic Value |
Outstanding at December 31, 2009 |  |  | 8,062 |  |  | $ | 7.45 |  |  |  | 5,523 |  |  | $ | 5.15 |  |  |  |  |  |  | $ | 70,958 |
Granted |  |  | 3,724 |  |  |  | 22.56 |  |  |  |  |  |  |  |  |  |  | $ | 9.19 |  |  |  |  |
Exercised |  |  | (143 | ) |  |  | 5.04 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 3,697 |
Forfeited |  |  | (729 | ) |  |  | 11.95 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Tendered |  |  | (685 | ) |  |  | 5.63 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2010 |  |  | 10,229 |  |  |  | 12.79 |  |  |  | 5,168 |  |  |  | 6.06 |  |  |  |  |  |  |  | 128,472 |
Granted |  |  | 526 |  |  |  | 30.56 |  |  |  |  |  |  |  |  |  |  |  | 9.72 |  |  |  |  |
Exercised |  |  | (2,008 | ) |  |  | 4.51 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 50,921 |
Forfeited |  |  | (406 | ) |  |  | 20.96 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2011 |  |  | 8,341 |  |  |  | 15.51 |  |  |  | 4,394 |  |  |  | 10.13 |  |  |  |  |  |  |  | 119,802 |
Granted |  |  | 1,223 |  |  |  | 36.94 |  |  |  |  |  |  |  |  |  |  |  | 10.82 |  |  |  |  |
Exercised |  |  | (2,925 | ) |  |  | 9.38 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 129,488 |
Forfeited |  |  | (74 | ) |  |  | 20.43 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2012 |  |  | 6,565 |  |  |  | 22.17 |  |  |  | 2,666 |  |  |  | 14.71 |  |  |  |  |  |  |  | 206,636 |
Vested and expected to vest at December 31, 2012 |  |  | 6,565 |  |  | $ | 22.17 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
The following table summarizes information about stock options outstanding at December 31, 2012 (shares in thousands):
Exercise Price |  | Options Outstanding |  |  | Weighted Average Remaining Vesting Life in Years |  |  | Options Exercisable |
$1.20 – 2.308 |  |  | 11 |  |  |  | — |  |  |  | 11 |
5.20 |  |  | 547 |  |  |  | — |  |  |  | 547 |
10.00 – 10.07 |  |  | 922 |  |  |  | 0.15 |  |  |  | 784 |
12.00 – 14.00 |  |  | 288 |  |  |  | — |  |  |  | 288 |
18.00 |  |  | 84 |  |  |  | 0.96 |  |  |  | 56 |
20.00 |  |  | 360 |  |  |  | 2.24 |  |  |  | 112 |
23.00 |  |  | 2,669 |  |  |  | 2.35 |  |  |  | 697 |
27.37 – 27.83 |  |  | 92 |  |  |  | 2.82 |  |  |  | 21 |
29.11 – 29.90 |  |  | 208 |  |  |  | 2.10 |  |  |  | 103 |
33.49 – 35.78 |  |  | 1,054 |  |  |  | 3.36 |  |  |  | 47 |
39.90 – 40.65 |  |  | 265 |  |  |  | 3.34 |  |  |  | — |
47.63 |  |  | 65 |  |  |  | 3.84 |  |  |  | — |
|  |  | 6,565 |  |  |  |  |  |  |  | 2,666 |
The aggregate intrinsic value of options exercisable at December 31, 2012 was $103.8 million. The weighted average remaining contractual term of options exercisable at December 31, 2012 was 6.1 years. The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31 as follows:
|  | 2012 |  |  | 2011 |  |  | 2010 |
Risk-free interest rate |  |  | 0.59 | % |  |  | 1.47 | % |  |  | 1.93 | %
Dividend yield |  |  | — |  |  |  | — |  |  |  | — |
Expected volatility |  |  | 36.49 | % |  |  | 37.83 | % |  |  | 44.53 | %
Expected life (in years) |  |  | 4.00 |  |  |  | 4.03 |  |  |  | 4.19 |
The Company considered the retirement and forfeiture provisions of the options and utilized its historical experience to estimate the expected life of the options. Prior to July 2012, due to the limited time the Company had been public, the Company estimated the volatility of the share price of the Company’s common stock by considering the historical volatility of the stock of similar public entities. In determining the appropriateness of the public entities included in the volatility assumption the Company considered a number of factors, including the entity’s life cycle stage, size, financial leverage, and products offered. Beginning July 1, 2012, the Company began utilizing the volatility of the share price of the Company’s common stock to estimate the volatility assumption for the Black-Scholes option pricing model. The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant. The weighted-average remaining contractual life for options outstanding was 7.4 and 7.0 years at December 31, 2012 and 2011, respectively. Restricted Stock Awards of restricted stock and restricted stock units are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. Prior to the Company’s initial public offering, the vesting of the shares granted in 2010 were contingent on the sale of the Company or a public offering of the Company’s common stock, subject to certain other conditions. The vesting of the shares granted in 2010 and beyond is generally based on the passage of time, performance or market conditions. Shares vesting based on the passage of time have vesting provisions ranging from one to six years. The fair value of restricted stock shares based on performance is based on the grant date fair value of the Company’s stock. The fair value of restricted stock shares based on market conditions was estimated using the Monte Carlo option pricing model with the following assumptions during 2011.
|  | 2011 |
Risk-free interest rate |  |  | 1.25 | %
Dividend yield |  |  | — |
Expected volatility |  |  | 37.00 | %
Expected life (in years) |  |  | 0.63 |
The risk-free interest rate and volatility assumptions were calculated consistently with those applied in the Black-Scholes options pricing model utilized in determining the fair value of the stock option awards. The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the following periods (shares in thousands):
|  | Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2009 |  |  | 4,015 |  |  | $ | 4.41 |
Granted |  |  | 1,475 |  |  |  | 22.68 |
Cancelled |  |  | (263 | ) |  |  | 15.24 |
Sold/issued |  |  | (3,977 | ) |  |  | 4.40 |
Outstanding at December 31, 2010 |  |  | 1,250 |  |  |  | 21.93 |
Granted |  |  | 261 |  |  |  | 31.08 |
Cancelled |  |  | (50 | ) |  |  | 21.00 |
Sold/issued |  |  | (621 | ) |  |  | 23.12 |
Outstanding at December 31, 2011 |  |  | 840 |  |  |  | 23.15 |
Granted |  |  | 131 |  |  |  | 41.69 |
Cancelled |  |  | (25 | ) |  |  | 33.49 |
Sold/issued |  |  | (474 | ) |  |  | 22.05 |
Outstanding at December 31, 2012 |  |  | 472 |  |  | $ | 28.98 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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