3. STOCK BASED COMPENSATION

During the three- and six-month periods ended June 30, 2015, the Board of Directors of the Company granted to certain management-level employees and executive officers, service-based restricted stock awards totaling 9,792 shares and 262,155 shares, respectively, with a grant-date fair value totaling approximately $0.2 million and $4.4 million, respectively. Such restricted stock awards vest beginning one year from the date of grant in annual installments of 25%. In addition, during the three-month period ended June 30, 2015, non-employee directors of the Company were granted service-based restricted stock awards totaling 45,619 shares with a grant-date fair value totaling approximately $0.8 million. Such restricted stock awards vest one year from the date of grant. Restricted stock is valued at the date of grant, based on the closing market price of the Company’s common stock, and expensed using the straight-line method over the requisite service period (generally the vesting period of the award). The Company estimates and excludes compensation cost related to awards not expected to vest based upon estimated forfeitures.

During the first quarter of 2015, the Board of Directors of the Company also granted to certain executive officers performance-based restricted stock awards pursuant to the terms of the Company’s executive compensation program totaling 109,705 shares with a grant-date fair value totaling approximately $1.9 million, which represents the maximum number of shares able to be earned by the executive officers at the end of a three-year performance period ending December 31, 2017.

The actual number of shares earned will be based on the Company’s performance related to the following performance criteria over the performance period:

●	Operating income growth (three-year compound annual growth rate);
●	Total consolidated revenue growth (three-year compound annual growth rate); and
●	Cash flow return on invested capital, excluding income taxes paid (three-year average).

At the end of the three-year period, the executive officers are eligible to receive up to a specified number of shares based upon the Company’s performance relative to these performance criteria over the performance period. In addition, the executive officers will accrue dividend equivalents for any cash dividend declared during the performance period, payable in the form of shares of Company common stock, based upon the maximum number of shares to be earned by the executive officers for each performance-based restricted stock award. Such hypothetical cash dividend payment shall be divided by the fair value of the Company’s common stock on the dividend payment date to determine the maximum number of notional shares to be awarded. At the end of the three-year performance period and on the date some or all of the shares are paid under the agreement, a pro rata number of notional dividend shares will be converted into an equivalent number of dividend shares paid and granted to the executive officers based upon the actual number of underlying shares earned during the performance period.

At December 31, 2014, the three-year performance period related to the performance-based restricted stock awards granted to certain executive officers on January 30, 2012 ended. Based on the Company’s actual financial results from 2012 through 2014, 67,239 of the shares subject to the awards and 4,043 dividend shares were earned and vested on January 30, 2015.

Stock-based compensation cost for performance-based restricted stock awards is measured at the grant date based on the fair value of shares expected to be earned at the end of the performance period, and is recognized as expense over the performance period based upon the probable number of shares expected to vest. The Company estimates and excludes compensation cost related to awards not expected to vest based upon estimated forfeitures.

The following table presents stock-based compensation expense included in the Company’s unaudited consolidated statements of income (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
Cost of portal revenues, exclusive of depreciation & amortization	$	365		$	320		$	769		$	602
Cost of software & services revenues, exclusive of depreciation & amortization		11			14			22			26
Selling & administrative		1,261			1,080			3,005			1,786
Stock-based compensation expense before income taxes		1,637			1,414			3,796			2,414
Income tax benefit		(640	)		(559	)		(1,488	)		(949	)
Net stock-based compensation expense	$	997		$	855		$	2,308		$	1,465