STOCK BASED COMPENSATION

At December 31, 2013, we had the following stock option and stock purchase plans:


•	the 2011 Incentive Stock Plan, which our stockholders approved in May 2011;


•	the 2008 Incentive Stock Plan, which our stockholders approved in May 2008;


•	the 2005 Incentive Stock Plan, which our stockholders approved in April 2005;


•	the 2000 Nonstatutory Stock Option Plan, which expired in February 2010;


•	the 1997 Stock Option Plan, which expired in January 2007;


•	the 1996 Directors Stock Option Plan, which expired in May 2006; and


•	the Employee Stock Purchase Plan (“ESPP”), which our stockholders approved in May 2001.

The 2011 Incentive Stock Plan authorizes awards of stock options, stock appreciation rights, restricted stock, and restricted stock units for a total of 3,000,000 shares; the 2008 Plan authorizes awards of stock options, stock appreciation rights, restricted stock, and restricted stock units for a total of 3,500,000 shares; the 2005 Plan authorizes awards of stock options and stock appreciation rights for a total of 4,800,000 shares; the 2000 Plan authorizes stock option grants for a total of 7,000,000 shares; the 1997 Plan authorized stock option grants for a total of 6,000,000 shares; and the Directors Plan authorized stock option grants for a total of 2,340,000 shares.

In terms of the stock options authorized, the 2011 Plan, 2008 Plan, and the 2005 Plan provide for the grant of non-statutory stock options (“NSOs”) and incentive stock options (“ISOs”) intended to qualify under section 422 of the Internal Revenue Code; the 2000 Plan provides for the grant of NSOs; the 1997 Plan provided for the grant of NSOs and ISOs; and the Directors Plan provided for the grant of NSOs.

The 2011, 2008 and 2005 Plans authorize awards to our officers, employees and consultants, and following the expiration of the Directors Plan in May 2006, to our directors; the 2000 Plan authorized awards to our employees and consultants but not to our officers and directors; the 1997 Plan authorized awards to our officers, directors, employees and consultants; and the Directors Plan authorized awards to our outside directors.

The exercise price per share of an option granted under any of our stock option plans may not be less than the closing price of a share of our common stock on the date of grant. The maximum term of an option granted under any plan may not exceed 10 years. An option may be exercised only when it is vested and, in the case of an option granted to an employee (including an officer), only while he or she remains an employee and for a limited period following the termination of his or her employment. New shares are issued upon exercise of stock options.

As of December 31, 2013, we reserved the following shares for issuance, consisting of both shares available for awards under the 2011 Plan, 2008 Plan, 2005 Plan, 2000 Plan, and 1997 Plan and shares issuable under outstanding stock option grants and restricted stock unit awards:



1996 Directors Plan shares		28,744
1997 Plan shares		3,384
2000 Plan shares		135,117
2005 Plan shares		1,843,929
2008 Plan shares		3,045,598
2011 Plan shares		3,000,000
Total shares reserved		8,056,772

Employee Stock Purchase Plan:

In October 2000, our Board of Directors adopted the Employee Stock Purchase Plan ("ESPP"), which our stock holders approved in May 2001, and was made effective as of July 1, 2001. The ESPP authorizes 900,000 shares of our common stock, which substantially most employees may purchase through payroll deductions at a price equal to 85% of the lower of the fair market values of the stock as of the beginning or the end of the six-month offering periods. An employee's payroll deductions, and stock purchase, may not exceed $5,000 during any offering period. During 2013, 2012 and 2011, 52,956 shares, 56,362 shares and 53,213 shares respectively, were issued through the ESPP.

Stock Based Compensation Expense:

During 2013, there were no changes to our stock compensation plans or modifications to outstanding stock-based awards which would change the value of any awards outstanding. Compensation expense for all stock-based compensation awards granted subsequent to January 1, 2006 is based on the grant-date fair value determined in accordance with the provisions of FASB accounting standards for share-based payments.

The following table presents the total stock-based compensation expense resulting from stock option awards, restricted stock units (“RSUs”), and the ESPP included in the Consolidated Statements of Income:



In thousands
	Years Ended December 31,
	2013		2012		2011
Cost of revenues - stock option plan	$	120	$	136	$	121
Selling, general and administrative - stock option plan	15,212		13,630		13,428
Selling, general and administrative - RSUs	1,116		1,474		811
Selling, general and administrative - ESPP	1,009		1,099		1,007
Total pre-tax expense	$	17,457	$	16,339	$	15,367

The following table sets forth the tax benefits related to stock compensation:



In thousands
	Years Ended December 31,
	2013		2012		2011
Tax benefit recognized in Statement of Income	$	4,518	$	5,818	$	6,091
Excess tax benefit realized	17,153		30,161		17,410

Stock Options:

Options granted to directors vest in one year and options granted to officers and employees generally vest over five years. Expense related to the graded vesting options is recognized using the straight-line method over the vesting period. Stock option activity for the year ended December 31, 2013, is summarized as follows:



	Number of Options		Weighted Average Exercise Price per Share
Outstanding at beginning of year	5,543,664		$	61.69
Granted	1,057,630		97.09
Exercised	(923,688	)	48.17
Forfeited	(135,371	)	79.22
Canceled or expired	(1,753	)	20.60
Outstanding at end of year	5,540,482		$	70.29
Exercisable at end of year	2,739,717		$	57.35
Vested and expected to vest	4,965,902		$	68.16

As of December 31, 2013, there was $27.2 million of total unrecognized compensation expense related to non-vested option awards, which is expected to be recognized over a weighted average period of 1.49 years.

The total exercise intrinsic value represents the total pre-tax value (the difference between the sales price on that trading day in the year ended December 31, 2013 and the exercise price associated with the respective option).



In thousands
	2013		2012		2011
Total intrinsic value of options exercised	$	55,757	$	97,816	$	52,939

The total aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between our closing stock price on the last day of trading for the year ended December 31, 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders assuming all option holders had exercised their options on December 31, 2013; this amount changes based on the fair market value of our stock.

The following table sets forth the information related to outstanding and exercisable options for the years ended December 31:



	2013		2012		2011
Weighted average remaining contractual life of outstanding options (in years)	6.60		6.70		6.50
Total aggregate intrinsic value of outstanding options (in thousands)	$	254,200	$	175,200	$	184,300
Weighted average remaining contractual life of exercisable options (in years)	5.30		5.50		5.30
Total aggregate intrinsic value of exercisable options (in thousands)	$	161,100	$	114,500	$	128,900

Options outstanding and exercisable as of December 31, 2013 by price range are presented below:



	Options Outstanding				Options Exercisable
Range of Exercise Price	Shares	Outstanding Average Remaining Life in Years	Weighted Average Exercise Price		Shares	Weighted Average Exercise Price
$22.110 - $38.565	573,918	2.46	$	33.46	565,918	$	33.50
$38.905 - $49.760	602,910	4.98	46.79		436,174	46.74
$50.020 - $51.550	744,346	6.09	51.53		401,501	51.52
$51.750 - $58.820	563,083	4.57	54.44		550,667	54.43
$58.900 - $84.910	176,926	7.32	77.06		119,462	78.54
$85.000 - $85.000	768,426	7.11	85.00		321,318	85.00
$85.020 - $86.020	13,850	8.11	85.50		2,450	85.55
$86.240 - $86.240	862,195	8.12	86.24		187,983	86.24
$86.830 - $95.030	211,946	8.08	90.48		115,370	88.85
$95.870 - $119.190	1,022,882	9.16	97.14		38,874	96.56
$22.110 - $119.190	5,540,482	6.58	$	70.29	2,739,717	$	57.35

The Company uses historical data to estimate expected life and volatility. The estimated fair value of stock options at the time of the grant using the Black-Scholes model option pricing model was as follows:



	Years Ended December 31,
	2013			2012			2011
Stock options granted (shares)	1,057,630			1,142,205			1,050,226
Weighted average fair value at grant date	$	22.02		$	20.14		$	21.07
Expected term (in years)	5.81			6.00			5.75
Expected volatility	27.03		%	27.87		%	27.42		%
Expected dividend yield	—		%	—		%	—		%
Risk free interest rate	1.00		%	1.05		%	2.21		%

Restricted Stock Units:

Restricted stock units ("RSUs") vest at the end of three or five years, and our 2008 and 2011 Plans include a share reserve related to RSUs granted at a 2-1 ratio. The following table sets forth the information related to RSUs for the years ended December 31:



	2013		2012		2011
Total aggregate intrinsic value of outstanding units (in thousands)	$	8,185	$	6,362	$	2,707
Per share fair value of units granted	96.40		86.24		85.00

A summary of the status of our non-vested RSUs and changes during the year 2013 are as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at beginning of year	68,202		$	79.45
Granted	17,900		96.40
Vested and released	(12,750	)	51.65
Forfeited	(2,895	)	90.75
Non-vested at end of year	70,457		$	88.32

As of December 31, 2013, there was $3.6 million of total unrecognized compensation expense related to RSUs, which is expected to be recognized over a weighted average period of 2.62 years. The fair value of units that vested during the years ended December 31, 2013 and 2012 was $1.2 million and $0.4 million, respectively. No units vested in 2011.