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(4) STOCK-BASED COMPENSATION
Stock-Based Compensation Plans
The Company maintains the 2010 Omnibus Long-Term Incentive Plan, the 2010 Employee Stock Purchase Plan, the 2000 Stock Option and Incentive Plan and the 2000 Employee Stock Purchase Plan (collectively, the “Stock Plans”).
Stock-Based Compensation Expense
The Company recorded $0.9 million and $1.6 million, respectively, in stock-based compensation expense during the three and six months ended June 30, 2011 in connection with the amortization of restricted common stock awards, stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees, non-employee directors and non-employee consultants. The Company recorded $0.5 million and $1.0 million, respectively, in stock-based compensation expense during the three and six months ended June 30, 2010 in connection with the amortization of restricted common stock awards, stock purchase rights granted under the Company’s employee stock purchase plan and stock options granted to employees, non-employee directors and non-employee consultants.
Determining Fair Value
Valuation and Recognition - The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model based on the assumptions in the table below. The estimated fair value of employee stock options is recognized to expense using the straight-line method over the vesting period. The fair value of each restricted stock award is determined on the date of grant using the closing stock price on that day. The fair value of restricted stock awards is recognized to expense using the straight-line method over the vesting period.
Expected Term - The Company uses the simplified calculation of expected term as the Company does not currently have sufficient historical exercise data on which to base an estimate of expected term. Using this method, the expected term is determined using the average of the vesting period and the contractual life of the stock options granted.
Expected Volatility - Expected volatility is based on the Company’s historical stock volatility data over the expected term of the awards.
Risk-Free Interest Rate - The Company bases the risk-free interest rate used in the Black-Scholes valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent expected term.
Forfeitures - The Company records stock-based compensation expense only for those awards that are expected to vest. Awards granted in the six months ended June 30, 2011 are all expected to vest and no forfeiture rate was utilized.
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Three Months Ended |
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Six Months Ended |
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|
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|
June 30, |
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June 30, |
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|
|
|
2011 |
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2010 |
|
2011 |
|
2010 |
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|
|
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Option Plan Shares |
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|
|
|
|
|
|
|
|
|
Risk-free interest rates |
|
1.88% |
|
1.79% |
|
1.88% - 2.3% |
|
1.79% - 2.69% |
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|
Expected term (in years) |
|
6 |
|
6 |
|
6 |
|
6 |
|
|
Expected volatility |
|
92% |
|
91% |
|
92% |
|
91% - 92% |
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|
Dividend yield |
|
0% |
|
0% |
|
0% |
|
0% |
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|
Weighted average fair value per share of options granted during the period |
|
$ |
5.64 |
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$ |
3.13 |
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$ |
4.35 |
|
$ |
2.85 |
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ESPP Shares |
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|
|
|
|
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|
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Risk-free interest rates |
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0.22% - 0.61% |
|
0.25% |
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0.22% - 0.61% |
|
0.25% |
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Expected term (in years) |
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0.5 - 2 |
|
0.5 |
|
0.5 - 2 |
|
0.5 |
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Expected volatility |
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48% - 63% |
|
53% |
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48% - 63% |
|
53% |
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Dividend yield |
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0% |
|
0% |
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0% |
|
0% |
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Weighted average fair value per share of options granted during the period |
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$ |
2.88 |
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$ |
1.22 |
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$ |
2.88 |
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$ |
1.22 |
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Stock Option and Restricted Stock Activity
A summary of stock option activity under the Stock Plans during the six months ended June 30, 2011 is as follows:
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Weighted |
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|
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|
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Weighted |
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Average |
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|
|
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|
|
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Average |
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Remaining |
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Aggregate |
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|
Options |
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|
|
Exercise |
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Contractual |
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Intrinsic |
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|
(Aggregate intrinsic value in thousands) |
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Shares |
|
Price |
|
Term (Years) |
|
Value (1) |
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|
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|
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|
|
|
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Outstanding, January 1, 2011 |
|
6,217,199 |
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$ |
1.93 |
|
7.9 |
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|
|
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Granted |
|
589,250 |
|
$ |
5.66 |
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|
|
|
|
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Exercised |
|
(87,875 |
) |
$ |
2.56 |
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|
|
|
|
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Forfeited |
|
(58,752 |
) |
$ |
12.45 |
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|
|
|
|
|
Outstanding, June 30, 2011 |
|
6,659,822 |
|
$ |
2.16 |
|
7.7 |
|
$ |
43,311 |
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|
|
|
|
|
|
|
|
|
|
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Exercisable, June 30, 2011 |
|
3,326,253 |
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$ |
1.86 |
|
7.0 |
|
$ |
22,851 |
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|
|
|
|
|
|
|
|
|
|
|
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Vested and expected to vest, June 30, 2011 |
|
6,659,822 |
|
$ |
2.16 |
|
7.7 |
|
$ |
43,311 |
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(1)The aggregate intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated as the difference between the exercise price of the underlying options and the market price of the Company’s common stock for options that had exercise prices that were lower than the $8.60 market price of the Company’s common stock at June 30, 2011.
As of June 30, 2011, there was $8.0 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under all equity compensation plans. Total unrecognized compensation cost will be adjusted for future changes in forfeitures. The Company expects to recognize that cost over a weighted average period of 2.89 years.
A summary of restricted stock activity under the Stock Plans during the six months ended June 30, 2011 is as follows:
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|
|
|
|
Weighted |
|
|
|
|
Restricted |
|
Average Grant |
|
|
|
|
Shares |
|
Date Fair Value |
|
|
Outstanding, January 1, 2011 |
|
263,630 |
|
$ |
6.20 |
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Granted |
|
283,425 |
|
$ |
5.61 |
|
|
Released |
|
(27,000 |
) |
$ |
4.26 |
|
|
Outstanding, June 30, 2011 |
|
520,055 |
|
$ |
5.98 |
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During the first quarter of 2011, the Company granted a total of 213,300 restricted stock units to certain executives that will vest based upon the satisfaction of certain service and performance conditions. The performance condition is based on the Company meeting certain performance targets in 2011. The Company performed an evaluation of internal and external factors, and determined that it is probable that the performance condition will be met and these shares will vest in full. Therefore, the Company will record expense for the fair value of these awards ratably over the vesting period. |