Share-Based Compensation

Share-based compensation expense was recorded net of estimated forfeitures for 2012, 2011 and 2010, such that expense was recorded only for those share-based awards that are expected to vest. In 2012, 2011 and 2010, we recorded share-based compensation and related benefits as follows:



	Year ended December 31,
(Dollars in thousands)	2012			2011			2010
Share-based compensation expense	$	21,861		$	18,221		$	13,761
Income tax benefit related to share-based compensation expense	(6,011		)	(4,833		)	(3,400		)
Capitalized compensation costs	2,647			1,466			996

Equity Incentive Plans

On May 11, 2006, our stockholders approved the 2006 Equity Incentive Plan (the “2006 Incentive Plan”). Our previous 1997 Equity Incentive Plan expired in December 2006. The 2006 Incentive Plan provides for the grant of various types of incentive awards, of which the following have been granted: (i) stock options; (ii) restricted stock awards; (iii) restricted stock units; and (iv) other cash or stock settled equity awards.

Subject to the provisions of Section 14 of the 2006 Incentive Plan, the maximum aggregate number of shares that may be awarded and sold was initially 3,000,000 shares plus: (i) shares that have been reserved but not issued under our 1997 Equity Incentive Plan as of May 11, 2006; and (ii) shares subject to stock options or similar awards granted under the 1997 Equity Incentive Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 1997 Equity Incentive Plan that are forfeited or repurchased by us. No further awards may be made under the 1997 Equity Incentive Plan, but it will continue to govern awards previously granted thereunder. In April 2012 and April 2011, our stockholders approved increases of 2,100,000 and 425,000 shares to the plan reserve, respectively.

Restricted stock awards and restricted stock units will be counted against the numerical limits of the 2006 Incentive Plan as two shares for every one share awarded. Further, if shares acquired under any such award are forfeited or repurchased by us and would otherwise return to the 2006 Incentive Plan, two times the number of such forfeited or repurchased shares will return to the 2006 Incentive Plan and will again become available for issuance.

Eligible participants in the 2006 Incentive Plan include directors, employees, and consultants. Options granted under the 2006 Incentive Plan generally expire seven years after the grant date. Options generally become exercisable over various periods, typically four years, from the grant date based on continued employment, and typically vest annually. Restricted stock awards and units generally vest over the passage of time and require continued employment or other service through the vesting period. Performance-based restricted stock units generally vest upon meeting certain performance-based objectives and, typically the passage of time and require continued employment or other service through the vesting period. The vesting period for restricted stock units cannot be less than three years unless they are subject to certain performance-based objectives, in which case the vesting period can be 12 months or longer.

Employee Stock Purchase Plan

We maintain the 1999 ESPP under which participating employees may annually contribute up to 10 percent of their gross compensation (not to exceed $25,000) to purchase shares of our common stock at 85 percent of its fair market value at either the beginning or end of each six-month offering period, whichever price is less. To be eligible to participate in the ESPP, an employee must, among other requirements, be employed by the Company on both the date of offering and date of purchase, and be employed customarily for at least 20 hours per week and at least five months per calendar year. We issued 202,696 shares and received $8.8 million in cash under the ESPP in 2012. At December 31, 2012, a total of 872,725 shares of our common stock were still available for future issuance under the ESPP.

Unrecognized Compensation Expense

As of December 31, 2012, unrecognized share-based compensation expense was as follows:



(Dollars in thousands)	Unrecognized Expense		Average Expected Recognition Period - in Years
Stock options	$	15,464	2.61
Restricted stock units	24,187		2.69
Total unrecognized share-based compensation expense	$	39,651

Valuation Assumptions

The fair values of share-based awards for employee stock options and employee stock purchases made under our ESPP were estimated using the Black-Scholes option pricing model. The fair values of restricted stock units were based on our closing stock price on the date of grant. The following weighted average assumptions and fair values were used for our employee stock options and restricted stock units:



Equity incentive plan awards	2012			2011			2010
Weighted average expected term of options in years	4.6			4.6			4.5
Weighted average expected volatility of the Company's underlying common stock	50.4		%	48.7		%	45.1		%
Risk-free interest rate	0.83			2.00			2.23
Expected dividend yield	—		%	—		%	—		%
Weighted average grant date fair value-stock options	$	27.00		$	25.12		$	19.15
Weighted average grant date fair value-restricted stock units	63.07			59.69			46.96

The following weighted average assumptions and fair values were used for our ESPP:



ESPP	2012			2011			2010
Expected term in years	0.5			0.5			0.5
Weighted average expected volatility of the Company's underlying common stock	43.5		%	27.3		%	36.7		%
Risk-free interest rate	0.11			0.15			0.22
Expected dividend yield	—			—			—
Weighted average fair value	$	14.43		$	13.02		$	10.22

The expected term is based on the implied term of the stock options using factors based on historical exercise behavior. The expected volatilities are based on a blended rate consisting of our historic volatility and our expected volatility over a five-year term which is an indicator of expected volatility and future stock price trends. For 2012, 2011 and 2010, expected volatilities for the ESPP were equal to the historical volatility for the previous six-month periods. The expected risk-free interest rates were based on the yields of Treasury Securities, as reported by the Federal Reserve Bank of New York, with maturities equal to the expected terms of the employee stock options.

Share-Based Payment Award Activity

The table below provides stock option information related to the 1997 Equity Incentive Plan and the 2006 Equity Incentive Plan for the year ended December 31, 2012:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value of In-The- Money Options
Outstanding at December 31, 2011	2,439,360		$	42.64
Granted	399,462		63.82
Exercised	(704,631	)	34.99
Forfeited	(67,710	)	49.81
Expired	(6,068	)	36.21
Outstanding at December 31, 2012	2,060,413		49.15		3.92	$	18,509,590
Vested and expected to vest at December 31, 2012	1,986,049		48.78		3.86	18,329,727
Exercisable at December 31, 2012	1,091,812		44.50		2.70	12,891,111

The aggregate intrinsic value of outstanding options shown in the table above represents the pretax intrinsic value based on our closing stock price of $55.97 as of December 31, 2012. The following table summarizes information regarding stock options outstanding as of December 31, 2011:



	Outstanding Options				Exercisable Options
Range of Exercise Prices	Shares	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$15.35-27.83	227,557	3.32	$	19.61	148,303	$	19.59
27.84-45.23	266,237	3.97	37.62		163,882	36.47
45.24-48.63	140,522	1.70	47.85		128,278	47.93
48.64-48.80	241,392	2.32	48.76		241,392	48.76
48.81-49.69	234,837	4.28	49.18		107,823	49.19
49.70-55.87	237,117	1.33	52.28		212,176	52.21
55.88-60.46	350,813	5.31	60.05		89,419	60.02
60.47-63.62	11,920	6.20	62.46		539	60.62
$63.63-64.43	350,018	6.33	64.37		—	—
	2,060,413	3.92	49.15		1,091,812	44.50

We expect to satisfy the exercise of stock options by issuing shares registered under the 1997 Equity Incentive Plan and the 2006 Incentive Plan, as applicable. All future awards of stock options and restricted stock units will be issued from the 2006 Incentive Plan. At December 31, 2012, 2,574,528 shares were available for future issuance.

The table below provides information for restricted stock units under the 2006 Equity Incentive Plan for the year ended December 31, 2012:



	Shares		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	499,119		$	52.72
Granted	343,997		63.07
Vested	(205,933	)	49.42
Forfeited	(51,640	)	58.93
Nonvested at December 31, 2012	585,543		59.42

The following table summarizes information regarding stock option and restricted stock activity during 2012, 2011 and 2010:



	Year ended December 31,
(Dollars in thousands)	2012		2011		2010
Total intrinsic value of stock options exercised	$	17,419	$	20,772	$	11,871
Total grant date fair value of stock options vested	17,169		14,771		12,086
Total intrinsic value of restricted stock vested	12,747		9,142		6,313
Total grant date fair value of restricted stock vested	10,176		7,240		5,522