SHARE-BASED COMPENSATION

6 Months Ended

Jun. 30, 2012

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

NOTE 10 — SHARE-BASED COMPENSATION

We issue share-based awards in the form of stock options for certain employees and officers. We recorded share-based compensation expense of $0.9 million and $1.4 million for the six months ended June 30, 2012 and 2011, respectively ($1.1 million and $0.6 million for the second quarter of 2012 and 2011, respectively). The amount in 2012 includes the reversal of $0.8 million of share-based compensation expense in the first quarter related to the departure of an Executive Officer in March 2012.

Outstanding share-based compensation currently consists only of stock option grants that are a combination of service-based and market-based options.

Service-based Options.  These options are granted at fair value on the date of grant. The options generally vest over four years with equal annual cliff-vesting and expire on the earlier of 10 years after the date of grant or following termination of service. A total of 0.9 million service-based awards were outstanding at June 30, 2012.

Market-based Options.  These option grants have two components each of which vest only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price realizes a compounded annual gain of at least 20% over the exercise price, so long as the stock price is at least double the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price realizes a compounded annual gain of at least 25% over the exercise price, so long as it is at least triple the exercise price. The vesting schedule for all market-based awards is 25% upon achievement of the criteria and the remaining 75% in three equal annual installments. A total of 2.2 million market-based awards were outstanding at June 30, 2012.

The Company granted 0.2 million stock options (at an average exercise price of $63.14 per share) and 0.1 million stock options (at an average exercise price of $29.99 per share) during the six months ended June 30, 2012 and 2011, respectively.

The fair value of the service-based options was determined using the Black-Scholes options pricing model while a lattice (binomial) model was used to determine the fair value of the market-based options using the following assumptions as of the grant date:

	June 30, 2012		June 30, 2011
	Black-Scholes	Binominal	Black-Scholes			Binominal
Risk-free interest rate	0.97% – 1.17%	0.08% – 2.04%	2.20		%	0.03% – 3.18%
Expected stock price volatility	34.22% – 34.65%	34.20% – 34.60%	48.00		%	55.90%
Expected dividend yield	—	—	—			—
Expected option life (in years)	6.25	—	6.25			—
Contractual life (in years)	—	14	—			14
Fair value	$19.25 – $22.80	$11.65 – $17.27	$	16.55		$18.09 and $18.76

The following table summarizes the weighted-average fair value of stock options granted, and the total intrinsic value of stock options exercised:

	June 30,
(in thousands, except per share amounts)	2012		2011
Weighted-average fair value at grant date per share	$	16.86	$	16.03
Intrinsic value of options exercised	8,339		2,855
Fair value of options vested	973		788

Share-based compensation expense is recorded net of estimated forfeiture rates ranging from 1% to 10%.

As of June 30, 2012, estimated unrecognized compensation costs related to share-based payments amounted to $4.9 million which we expect to recognize over a weighted-average remaining requisite service period of approximately 3.0 years.

The following table summarizes the activity of our stock options:

	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)
Outstanding at December 31, 2011	3,243,958		$	14.19	6.7	$	116,755
Granted	198,500		63.14
Exercised	(177,389	)	12.85
Forfeited	(159,095	)	23.75
Outstanding at June 30, 2012	3,105,974		16.50		6.5	$	175,076
Exercisable at June 30, 2012	1,818,151		$	11.16	5.8	$	112,847

Stock Repurchase Authorization

In May 2012, our shareholders approved a new stock repurchase program, which replaces the previous stock repurchase program. Under the new plan, we are authorized to purchase up to 3.5 million shares of our common stock in the open market in addition to amounts previously purchased under the prior plan. From authorization of the prior plan in May 2010 through June 30, 2012, we have purchased approximately 2.5 million shares of our common stock in the open market at an average price of $37.49 per share. During the six months ended June 30, 2012, we purchased 0.3 million shares of common stock at an average price of $63.25 per share. Since no common stock was repurchased during the second quarter of 2012, 3.5 million shares of common stock remain available for repurchase under the plan.