5. Equity Compensation

On May 7, 2013, our shareholders approved the ITT Educational Services, Inc. Amended and Restated 2006 Equity Compensation Plan (the “Amended 2006 Plan”). Prior to May 7, 2013, we adopted and our shareholders approved the 2006 ITT Educational Services, Inc. Equity Compensation Plan (the “Original 2006 Plan”). The Amended 2006 Plan increased the maximum number of shares of our common stock that may be issued pursuant to awards under the plan to 7,350,000, an increase of 3,350,000 over the 4,000,000 maximum under the Original 2006 Plan.

The stock-based compensation expense and related income tax benefit recognized in our Condensed Consolidated Statements of Income in the periods indicated were as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Stock-based compensation expense	$	3,304		$	4,291		$	8,698		$	13,046
Income tax (benefit)	($	1,272	)	($	1,652	)	($	3,349	)		($5,023	)

We did not capitalize any stock-based compensation cost in the three or nine months ended September 30, 2013 or 2012.

As of September 30, 2013, we estimated that pre-tax compensation expense for unvested stock-based compensation grants in the amount of approximately $17,700, net of estimated forfeitures, will be recognized in future periods. This expense will be recognized over the remaining service period applicable to the grantees which, on a weighted-average basis, is approximately 2.1 years.

The stock options granted, forfeited, exercised and expired in the period indicated were as follows:


	Nine Months Ended September 30, 2013
				Weighted					Weighted
				Average		Aggregate			Average		Aggregate
	# of			Exercise		Exercise			Remaining		Intrinsic
	Shares			Price		Price			Contractual Term		Value ⁽¹⁾
Outstanding at beginning of period		1,574,604		$	84.90	$	133,691
Granted		154,000		$	19.31		2,974
Forfeited		(16,668	)	$	75.11		(1,252	)
Exercised		0		$	0.00		0
Expired		(361,988	)	$	70.59		(25,554	)

Outstanding at end of period		1,349,948		$	81.38	$	109,858			2.7	$	1,800

Exercisable at end of period		1,060,443		$	91.47	$	97,003			2.3	$	0

(1)

The aggregate intrinsic value of the stock options was calculated by identifying those stock options that had a lower exercise price than the closing market price of our common stock on September 30, 2013 and multiplying the difference between the closing market price of our common stock and the exercise price of each of those stock options by the number of shares subject to those stock options that were outstanding or exercisable, as applicable.

The following table sets forth information regarding the stock options granted and exercised in the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Shares subject to stock options granted		0		0		154,000		156,500
Weighted average grant date fair value per share	$	0	$	0	$	9.16	$	31.36
Shares subject to stock options exercised		0		4,855		0		202,820
Intrinsic value of stock options exercised	$	0	$	14	$	0	$	4,802
Proceeds received from stock options exercised	$	0	$	254	$	0	$	8,345
Tax benefits realized from stock options exercised	$	0	$	5	$	0	$	1,602

The intrinsic value of a stock option is the difference between the fair market value of the stock and the option exercise price.

The fair value of each stock option grant was estimated on the date of grant using the following assumptions:

Three Months
Ended
September 30,

Nine Months
Ended
September 30,

2013

2012

2013

2012

Risk-free interest rates

Not applicable

0.7

Expected lives (in years)

Not applicable

4.6

4.5

Volatility

Not applicable

Dividend yield

Not applicable

None

The following table sets forth the number of restricted stock units (“RSUs”) that were granted, forfeited and vested in the period indicated:


	Nine Months Ended September 30, 2013
	# of RSUs			Weighted Average Grant Date Fair Value
Unvested at beginning of period		413,645		$	75.35
Granted		521,614		$	19.96
Forfeited		(94,471	)	$	51.14
Vested		(68,066	)	$	88.70

Unvested at end of period		772,722		$	39.74

The total fair market value of the RSUs that vested and were settled in shares of our common stock was $49 in the three months ended September 30, 2013 and $29 in the three months ended September 30, 2012. The total fair market value of the RSUs that vested and were settled in shares of our common stock was $1,226 in the nine months ended September 30, 2013 and $4,565 in the nine months ended September 30, 2012. In the nine months ended September 30, 2012, 48,935 RSUs vested and were settled in cash for $3,073.