Stock-Based Compensation

6 Months Ended

Jun. 30, 2013

Stock-Based Compensation

6. Stock-Based Compensation

We have stock incentive plans through which employees and directors have been or will be granted stock-based compensation. We recognize compensation expense for the grant date fair value of stock-based awards over the applicable vesting period. The components of our pre-tax stock-based compensation expense, net of forfeitures and associated income tax effect, were as follows (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Stock options	$	—	$	16	$	6	$	31
Restricted stock		323		562		663		1,051
	$	323	$	578	$	669	$	1,082
Income tax effect	$	125	$	225	$	260	$	420

We estimate the fair value of stock options granted using the Black-Scholes option-pricing model. This model requires several assumptions, which we have developed based on historical trends and updated based on current market observations. The accuracy of these assumptions is critical to the estimate of fair value for these equity instruments.

Our restricted stock unit awards include both time-based awards that vest ratably over three years and restricted stock units that are tied to the achievement of certain financial targets and stock performance criteria and cliff-vest in three years. The financial targets include revenue and adjusted earnings per share measurements. Total stockholder return is considered a market condition and the fair value of those awards was calculated using a Monte Carlo simulation valuation model, which utilizes Level 3 inputs.