Share-Based Compensation

6 Months Ended

Jun. 30, 2011

Share-Based Compensation [Abstract]

Share-Based Compensation

13. Share-Based Compensation

     The following table sets forth information with regard to the income statement recognition of share-based compensation (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Cost of revenue	$	115	$	90	$	243	$	180
Selling, general and administrative		1,634		1,886		3,429		2,808
Research and development		77		61		159		114
Share-based compensation	$	1,826	$	2,037	$	3,831	$	3,102

     There was no capitalized share-based compensation cost recorded during the six-month periods ended June 30, 2011, and 2010.

Stock Options

     Stock options awarded to employees under the 2001 Stock Incentive Plan and the 2008 Equity Compensation Plan (referred to herein collectively as the “SIPs”) generally vest annually over a three-year period, have a 10-year term and have an exercise price of not less than the fair market value of the Company’s common stock at the date of grant. For stock options granted prior to 2010, the Company’s stock option agreements generally provide for accelerated vesting if there is a change in control of the Company. Effective for stock options granted after 2009, the Company’s stock option agreements provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the participant’s employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the stock option agreement.

     Compensation expense for stock options is recognized on a straight-line basis over the vesting period using the fair value of each stock option estimated as of the grant date. The Company uses historical data to estimate future option exercises and employee terminations in order to determine the expected term of the stock option, where the expected term of stock option granted represents the period of time that such stock option is expected to be outstanding. Identified groups of optionholders with similar historical exercise behavior are considered separately for valuation purposes. The expected term of stock options can vary for groups of optionholders exhibiting different behavior. The fair value of each stock option granted to employees and nonemployee directors during the six-month periods ended June 30, 2011, and 2010, was estimated on the date of grant using a Black-Scholes stock option valuation model, which uses a risk-free rate and volatility rate, among other things, to estimate fair value. The risk-free rate for periods within the contractual life of the stock option is based on the U.S. Treasury strip bond yield curve in effect at the time of grant. Expected volatilities are based on the historical volatility of the Company’s common stock.

     For the three-month periods ended June 30, 2011 and 2010, no stock options were granted, respectively.

     For the six-month periods ended June 30, 2011 and 2010, the number of stock options granted was 73,225 and 288,544, respectively, and the weighted-average exercise price for those stock options granted was $44.06 and $22.84, respectively.

     As of June 30, 2011, there was $2.6 million in total unrecognized compensation cost related to stock options granted under the SIPs. This aggregate unrecognized cost is expected to be recognized over a weighted-average remaining period of 1.8 years. The weighted-average exercise price and weighted-average remaining contractual term for outstanding stock options as of June 30, 2011, were $32.84 and 6.02 years, respectively, and as of June 30, 2010, $30.84 and 6.98 years, respectively.

Service and Performance Award Shares

     Service award shares. During the six-month period ended June 30, 2011, the Company granted service award shares under the SIPs. These service award shares (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) vest in four equal annual installments beginning on the first anniversary date of the grant, and (iii) for any unvested shares, expire without vesting if the employee is no longer employed by the Company. For those service award shares granted prior to 2010, the service award shares generally provide for accelerated vesting if there is a change in control of the Company. Effective for service award shares granted after 2009, the service award shares provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the participant’s employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the restricted stock unit agreement.

     Compensation expense for service award shares is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant.

     As of June 30, 2011, there was $2.8 million of total unrecognized compensation cost related to service award shares granted under the SIPs. This aggregate unrecognized cost for service award shares is expected to be recognized over a weighted-average period of 2.26 years. Additional information for the three-and six-month periods ended June 30, 2011, and 2010, is noted in the following table (dollars in thousands, except per share amounts):

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Number of service award shares granted		—		—		18,434		—
Weighted average grant-date fair value per share		—		—	$	42.72		—
Fair value of service award shares vested	$	1,531	$	1,467	$	2,214	$	2,190

     Performance award shares. During the six-month periods ended June 30, 2011 and 2010, the Company granted performance award shares under the SIPS. These performance award shares (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) will expire without vesting if the Company’s return on invested capital (“ROIC”) for the annual performance period does not exceed 12 percent, which is an approximation of the Company’s weighted average cost of capital, (iii) will, if the Company’s ROIC exceeds 12 percent, vest in four equal annual installments beginning on the first anniversary date of the grant, and (iv) for any unvested shares, expire without vesting if the employee is no longer employed by the Company. The Company’s performance award shares provide for accelerated vesting if (i) there is a change in control of the Company and (ii) the participant’s employment terminates during the 24-month period following the effective date of the change in control for one of the reasons specified in the performance-based restricted stock unit agreement.

     Compensation expense for performance award shares is recognized using the fair market value of the Company’s common stock on the date of grant and on an accelerated basis. The Company recognizes expense for these performance award shares under the assumption that the performance ROIC target will be achieved. If it appears such performance ROIC target will not be met, the Company would stop recognizing any further compensation cost and any previously recognized compensation cost would be reversed.

     Additional information for the three- and six-month periods ended June 30, 2011, and 2010, is noted in the following table (dollars in thousands, except per share amounts):

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Number of performance award shares granted		—		39,630		22,511		91,553
Weighted average grant-date fair value per share		—	$	30.46	$	44.44	$	25.76
Fair value of performance award shares vested	$	415		—	$	804		—

     As of June 30, 2011, there was $1.6 million of total unrecognized compensation cost related to performance award shares granted under the SIPs. This aggregate unrecognized cost is expected to be recognized over a weighted-average period of 3.10 years.

Deferred Stock Units

     Service award grant to CEO. During the six month periods ended June 30, 2011 and 2010, the Company granted deferred stock unit service awards (“Service DSUs”) under the SIPs to its CEO. Service DSUs are issued under the SIPs at the fair market value of the Company’s stock on the date of grant, and generally vest annually over a four-year period on each anniversary date of the grant. The Service DSUs, if vested, will be convertible into shares of the Company’s common stock following the holder’s termination of employment. The Service DSUs provide for accelerated vesting upon termination without cause or retirement as defined in the CEO’s employment agreement. No Service DSUs were converted into the Company’s common stock shares during the six-month periods ended June 30, 2011, and 2010. Additional information for the three- and six-month periods ended June 30, 2011, and 2010, is noted in the following table (dollars in thousands, except per share amounts):

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
Service DSUs Awarded to CEO	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Number of shares granted		—		—		900		60,144
Weighted-average grant date fair value per share		—		—	$	44.44	$	24.94
Fair value of shares vested		—		—	$	704		—

     Compensation expense for Service DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of June 30, 2011, there was $0.4 million of total unrecognized compensation cost related to Service DSUs. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of 0.53 years.

     Performance award grant to CEO. During the six-month periods ended June 30, 2011 and 2010, the Company granted deferred stock unit performance awards (“Performance DSUs”) under the SIPs to its CEO. These Performance DSUs (i) were issued at the fair market value of the Company’s common stock on the date of grant, (ii) will expire without vesting if the Company’s return on invested capital (“ROIC”) for the annual performance period does not exceed 12 percent, which is an approximation of the Company’s weighted average cost of capital, (iii) will, if the Company’s ROIC exceeds 12 percent, vest in four equal annual installments beginning on the first anniversary date of the grant, and (iv) provide for accelerated vesting upon termination without cause or retirement as defined in the CEO’s employment agreement. These Performance DSUs, if vested, will be convertible into shares of the Company’s common stock, subsequent to termination of employment. Additional information for the three- and six-month periods ended June 30, 2011, and 2010, is noted in the following table (dollars in thousands, except per share amounts):

	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
Performance DSUs Awarded to CEO	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Number of shares granted		—		—		24,122		23,004
Weighted-average grant date fair value per share		—		—	$	44.44	$	22.17
Fair value of shares vested		—		—	$	227		—

     Compensation expense for Performance DSUs is recognized using the fair market value of the Company’s common stock on the date of grant and on an accelerated basis. The Company recognizes expense for these Performance DSUs under the assumption that the performance ROIC target will be achieved. If it appears such performance ROIC target will not be met, the Company would stop recognizing any further compensation cost and any previously recognized compensation cost would be reversed. As of June 30, 2011, there was $0.9 million of total unrecognized compensation cost related to Performance DSUs. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of 1.41 years.

     Awards for service on Board of Directors (“Board”). The Company issues deferred stock units to its Board of Directors (“Board DSUs”) under the SIPs. These Board DSUs (i) were issued at the fair market value of the Company’s common stock on the date of grant and (ii) if vested, will be convertible to shares of the Company’s common stock subsequent to termination of service as a director. Annual grants of Board DSUs vest annually in three equal installments over a three-year period.

     In addition to receiving Board DSU grants annually, the Board members have the right to elect to receive all or a portion of their retainer and meeting attendance fees as cash and/or deferred stock units, which vest immediately. Only nonemployee directors are eligible for director compensation and therefore Board DSUs are only granted to nonemployee Directors.

     Additional information for the three- and six-month periods ended June 30, 2011, and 2010, is noted in the following table (dollars in thousands, except per share amounts):

Board DSUs and Dividend	Three Months Ended		Three Months Ended		Six Months Ended		Six Months Ended
Equivalents Awarded to Board	June 30, 2011		June 30, 2010		June 30, 2011		June 30, 2010
Number of shares granted		21,061		25,517		22,481		31,676
Weighted-average grant date fair value per share	$	40.67	$	29.03	$	40.60	$	28.38
Fair value of shares vested	$	57	$	41	$	173	$	84

     Compensation expense for Board DSUs is recognized on a straight-line basis over the vesting period using the fair market value of the Company’s common stock on the date of grant. As of June 30, 2011, there was $1.4 million of total unrecognized compensation cost related to Board DSUs granted to nonemployee directors. This aggregate unrecognized cost is expected to be recognized over the weighted-average period of 2.47 years.