Share Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Share Based Compensation

4. Share Based Compensation

The Company has Equity Compensation Plans (the Plans) pursuant to which the Company’s board of directors may grant stock options or restricted stock to employees. On May 30, 2013, the Company’s stockholders authorized an increase of 6,500,000 shares of common stock available for grant pursuant to the 2010 Equity Compensation Plan. Giving effect to this increase, there were 7,189,714 additional shares remaining available for grant under the Plans at September 30, 2013.

The table below summarizes the expense recognized related to share-based payments recognized for the three and nine month periods ended September 30 (in thousands):

	Three Months Ended September 30,				Nine months Ended September 30,
	2013		2012		2013		2012
Stock options	$	3,051	$	2,836	$	8,553	$	7,462
Restricted stock		1,331		3,658		3,888		6,825
Stock-based compensation	$	4,382	$	6,494	$	12,441	$	14,287

The tax benefits recorded on stock based compensation were $1.5 million and $1.4 million for the three month periods ended September 30, 2013 and 2012, respectively. The tax benefits recorded on stock based compensation were $4.2 million and $3.8 million for the nine month periods ended September 30, 2013 and 2012, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of September 30, 2013 (in thousands):

	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	24,479		1.90
Restricted stock		3,835		0.74
Total	$	28,314

Stock Options

Stock options are granted with an exercise price estimated to be equal to the fair market value on the date of grant as authorized by the Company’s board of directors. Options granted have vesting provisions ranging from one to nine years. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting.

The following table summarizes the changes in the number of shares of common stock under option for the nine month period ended September 30, 2013 (shares and aggregate intrinsic value in thousands):

	Shares			Weighted Average Exercise Price		Options Exercisable at End of Period		Weighted Average Exercise Price of Exercisable Options		Weighted Average Fair Value of Options Granted During the Period		Aggregate Intrinsic Value
Outstanding at December 31, 2012		6,565		$	22.17		2,666	$	14.71			$	206,636
Granted		271			76.86					$	21.86
Exercised		(1,117	)		20.30								100,381
Forfeited		(116	)		28.68
Outstanding at September 30, 2013		5,603		$	25.06		2,802	$	16.96			$	476,854
Expected to vest as of September 30, 2013		5,603		$	25.06

The aggregate intrinsic value of stock options exercisable at September 30, 2013 was $261.2 million. The weighted average contractual term of options exercisable at September 30, 2013 was 5.9 years.

The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model during the nine months ended September 30, 2013, with the following weighted-average assumptions for grants during the period.

	Nine months Ended September 30,
	2013			2012
Risk-free interest rate		0.73	%		0.59	%
Dividend yield		—			—
Expected volatility		34.95	%		36.53	%
Expected life (in years)		4.0			4.0

The Company considered the retirement and forfeiture provisions of the options and utilized its historical experience to estimate the expected life of the options.

Prior to June 30, 2012, the Company estimated the volatility of the share price of the Company’s common stock by considering the historical volatility of the stock of similar public entities. In determining the appropriateness of the public entities included in the volatility assumption the Company considered a number of factors, including the entity’s life cycle stage, size, financial leverage, and products offered. Beginning July 1, 2012, the Company began utilizing the volatility of the share price of the Company’s common stock to estimate the volatility assumption for the Black-Scholes option pricing model.

The risk-free interest rate is based on the yield of a zero coupon U.S. Treasury security with a maturity equal to the expected life of the option from the date of the grant.

The weighted-average remaining contractual life for options outstanding was 6.9 and 7.4 years at September 30, 2013 and December 31, 2012, respectively.

Restricted Stock

Awards of restricted stock are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. The vesting of the restricted stock and restricted stock units granted is generally based on the passage of time, performance or market conditions. Shares vesting based on the passage of time have vesting provisions ranging from one to four years.

The fair value of restricted stock granted based on market conditions was estimated using the Monte Carlo option pricing model at the grant date. The risk-free interest rate and volatility assumptions for restricted stock shares granted with market conditions were calculated consistently with those applied in the Black-Scholes options pricing model utilized in determining the fair value of the stock option awards. No such awards were granted during the nine months ended September 30, 2013.

The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the nine months ended September 30, 2013 (shares in thousands):

	Shares			Weighted Average Grant Date Fair Value
Unvested at December 31, 2012		472		$	28.98
Granted		41			61.31
Vested		(105	)		24.41
Cancelled		(31	)		35.42
Unvested at September 30, 2013		377		$	39.94