6.	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 June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Stock-based compensation expense	$	2,301		$	4,272		$	5,394		$	8,755
Income tax (benefit)	($	886	)	($	1,645	)	($	2,077	)	($	3,371	)

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

As of June 30, 2013, we estimated that pre-tax compensation expense for unvested stock-based compensation grants in the amount of approximately $21,700, 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 2.0 years.

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


	Six Months Ended June 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		(286,494	)	$	62.38		(17,871	)

Outstanding at end of period		1,425,442		$	82.46	$	117,541			2.9	$	784

Exercisable at end of period		1,135,937		$	92.16	$	104,687			2.6	$	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 June 28, 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 June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
Shares subject to stock options granted		154,000		0		154,000		156,500
Weighted average grant date fair value per share	$	9.16	$	0	$	9.16	$	31.36
Shares subject to stock options exercised		0		93,911		0		197,965
Intrinsic value of stock options exercised	$	0	$	2,299	$	0	$	4,788
Proceeds received from stock options exercised	$	0	$	3,423	$	0	$	8,091
Tax benefits realized from stock options exercised	$	0	$	733	$	0	$	1,597

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 June 30,				Six Months Ended June 30,
	2013			2012	2013			2012
Risk-free interest rates		0.7	%	Not applicable		0.7	%		0.7	%
Expected lives (in years)		4.6		Not applicable		4.6			4.5
Volatility		60	%	Not applicable		60	%		51	%
Dividend yield		None		Not applicable		None			None

The following table sets forth the number of RSUs that were granted, forfeited and vested in the period indicated:


	Six Months Ended June 30, 2013
	# of RSUs			Weighted Average Grant Date Fair Value
Unvested at beginning of period		413,645		$	75.35
Granted		514,317		$	19.86
Forfeited		(55,303	)	$	64.23
Vested		(66,334	)	$	89.76

Unvested at end of period		806,325		$	39.53

The total fair market value of the RSUs that vested and were settled in shares of our common stock was $174 in the three months ended June 30, 2013 and $1,782 in the three months ended June 30, 2012. The total fair market value of the RSUs that vested and were settled in shares of our common stock was $1,177 in the six months ended June 30, 2013 and $4,536 in the six months ended June 30, 2012. In the six months ended June 30, 2012, 48,935 RSUs vested and were settled in cash for $3,073.