5. Share Based Compensation

The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest. 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. The Company is authorized to issue grants of restricted stock and stock options to purchase up to 26,963,150 shares for the years ended December 31, 2013, 2012 and 2011, respectively. On May 13, 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 6,837,714 additional shares remaining available for grant under the Plans at December 31, 2013.

The table below summarizes the expense related to share-based payments for the years ended December 31 (in thousands):


	2013		2012		2011
Stock options	$	11,677	$	10,341	$	9,654
Restricted stock		14,999		8,934		12,089

Stock-based compensation	$	26,676	$	19,275	$	21,743

The tax benefits recorded on stock based compensation were $9.8 million, $6.8 million and $7.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.

The following table summarizes the Company’s total unrecognized compensation cost related to stock-based compensation as of December 31, 2013:


	Unrecognized Compensation Cost		Weighted Average Period of Expense Recognition (in Years)
Stock options	$	22,492		1.71
Restricted stock		22,312		1.04

Total	$	44,804

In connection with making fair value estimates related to the Company’s stock option and restricted stock grants prior to the initial public offering, management considered various factors including third-party equity transactions and certain commonly used valuation techniques. The Company sold convertible preferred stock to third parties in 2005, 2006 and 2009. In addition, in 2007 the Company repurchased common stock and preferred stock from the holders at a negotiated value which the Company believed represented fair value. These third-party transactions served as a basis for determining the fair value of our common stock at various dates. In situations where the Company sold preferred stock that included conversion and dividend features the Company considered such features in those instruments and the fact that such instruments could not be freely traded in determining a fair value for its common stock. Generally, the Company concluded that the fair value of its common stock was 10% to 25% less than the preferred stock at the date of such third-party transactions due to the features attributable to the preferred stock holders. In periods prior to third-party transactions and in intervening periods subsequent to the third-party transactions the Company utilized various earnings and revenue multiples to estimate the fair value of its common stock or to serve as an additional factor in determining fair value.

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 six years. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting. The Company issues new shares upon stock option exercises.

The following summarizes the changes in the number of shares of common stock under option for the following periods (shares and aggregate intrinsic value in thousands):


	Shares			Weighted Average Exercise Price		Options Exercisable at End of Year		Weighted Average Exercise Price of Exercisable Options		Weighted Average Fair Value of Options Granted During the Year		Aggregate Intrinsic Value
Outstanding at December 31, 2010		10,229		$	12.79		5,168	$	6.06			$	128,472
Granted		526			30.56					$	9.72
Exercised		(2,008	)		4.51								50,921
Forfeited		(406	)		20.96

Outstanding at December 31, 2011		8,341			15.51		4,394		10.13				119,802
Granted		1,223			36.94						10.82
Exercised		(2,925	)		9.38								129,488
Forfeited		(74	)		20.43

Outstanding at December 31, 2012		6,565			22.17		2,666		14.71				206,636
Granted		307			80.77						23.00
Exercised		(1,425	)		21.13								136,807
Forfeited		(116	)		28.68

Outstanding at December 31, 2013		5,331			25.68		2,589		16.57				487,673
Vested and expected to vest at December 31, 2013		5,331		$	25.68

The following table summarizes information about stock options outstanding at December 31, 2013 (shares in thousands):


Exercise Price	Options Outstanding		Weighted Average Remaining Vesting Life in Years		Options Exercisable
$1.20 – 6.548		517		—		517
10.00 – 14.00		832		—		832
18.00 – 20.00		287		1.00		142
23.00		1,980		1.38		754
27.83 – 34.72		290		1.44		108
35.04 – 40.65		1,070		2.48		236
47.63 – 58.02		108		2.96		—
74.99 – 87.61		212		3.46		—
111.09		35		3.81		—

		5,331				2,589

The aggregate intrinsic value of options exercisable at December 31, 2013 was $260 million. The weighted average remaining contractual term of options exercisable at December 31, 2013 was 5.6 years.

The fair value of stock option awards granted was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31 as follows:


	2013			2012			2011
Risk-free interest rate		0.76	%		0.59	%		1.47	%
Dividend yield		—			—			—
Expected volatility		34.95	%		36.49	%		37.83	%
Expected life (in years)		4.00			4.00			4.03

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 July 2012, due to the limited time the Company had been public, 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 6.7 and 7.4 years at December 31, 2013 and 2012, respectively.

Restricted Stock

Awards of restricted stock and restricted stock units are independent of stock option grants and are generally subject to forfeiture if employment terminates prior to vesting. The vesting of the shares 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 shares based on performance is based on the grant date fair value of the Company’s stock.

The fair value of restricted stock shares based on market conditions was estimated using the Monte Carlo option pricing model with the following assumptions during 2013 and 2011. There were no restricted stock shares granted based on market conditions in 2012.


	2013			2011
Risk-free interest rate		0.42	%		1.25	%
Dividend yield		—			—
Expected volatility		30.00	%		37.00	%
Expected life (in years)		1.75			0.63

The risk-free interest rate and volatility assumptions were calculated consistently with those applied in the Black-Scholes options pricing model utilized in determining the fair value of the stock option awards.

The following table summarizes the changes in the number of shares of restricted stock and restricted stock units for the following periods (shares in thousands):


	Shares			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010		1,250		$	21.93
Granted		261			31.08
Cancelled		(50	)		21.00
Sold/issued		(621	)		23.12

Outstanding at December 31, 2011		840			23.15
Granted		131			41.69
Cancelled		(25	)		33.49
Issued		(474	)		22.05

Outstanding at December 31, 2012		472			28.98
Granted		358			92.16
Cancelled		(31	)		35.42
Issued		(165	)		30.93

Outstanding at December 31, 2013		634		$	67.83