7. Stock Plans

The Company’s Amended and Restated 2006 Omnibus Incentive Plan (the “Plan”) permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other share-based awards to its directors, employees and consultants. At December 31, 2013, approximately 4.6 million shares of common stock remained available for issuance pursuant to future grants of awards under the 2006 Plan (with a limit of approximately 1.0 million shares available for awards other than stock options or stock appreciation rights).

Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant and generally expire ten years after the date of grant. Generally, stock options granted to non-employee directors are exercisable after one year from the date of grant, while options granted to employees are exercisable one to four years from the date of grant. The Company records compensation expense equal to the fair value of each stock option award granted on a straight line basis over the option’s vesting period. The fair value of each option award is estimated on the date of grant using the Black-Scholes-Merton option pricing formula that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate expected option exercise and employee termination patterns within the valuation model. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted average for key assumptions used in determining the fair value of options granted in the period ended December 31 are as follows:


	2013		2012			2011
Expected volatility		N/A		70.6	%		68.2	%
Weighted-average expected volatility		N/A		70.6	%		68.2	%
Expected dividends		N/A		—			—
Expected term (in years)		N/A		5.2			5.1
Risk-free rate		N/A		0.9	%		2.1	%

A summary of stock option activity under the Company’s equity incentive plans as of December 31, 2013 and changes during the year ended December 31, 2013 is presented below:


Stock Options	Number of Shares			Weighted Average Exercise Price
Outstanding at January 1, 2013		1,175,646		$	26.02
Granted		—			—
Exercised		(222,185	)		23.82
Canceled		(81,412	)		32.55

Outstanding at December 31, 2013		872,049			25.99

Exercisable at December 31, 2013		664,627			26.70

The weighted average remaining contractual term of options outstanding and exercisable as of December 31, 2013 was 3.9 and 2.9 years, respectively. The aggregate intrinsic value of options outstanding and exercisable as of December 31, 2013 was $13.8 million and $10.3 million, respectively. The weighted-average grant-date fair value of options granted during 2012 and 2011 was $14.34 and $15.96, respectively. The total intrinsic value of options exercised during 2013, 2012, and 2011 was $4.3 million, $21.5 million, and $2.4 million, respectively.

The Plan also provides for the award of restricted stock and restricted stock units (“Restricted Stock Awards”). Restricted Stock Awards granted to employees vest one to four years from the date of grant, and Restricted Stock Awards granted to non-employee directors vest after one year from the date of grant, unless the recipient chooses to defer the vesting for a period of time. The fair value of Restricted Stock Awards is determined based on the market price of the Company’s stock at the date of grant. The Company generally records compensation expense equal to the fair value of each Restricted Stock Award granted over the vesting period. The weighted-average grant-date fair value of Restricted Stock Awards granted during 2013, 2012, and 2011 was $43.56, $33.57, and $33.26, respectively.

During 2013, the Company granted 37,000 additional restricted stock units to certain members of its management team which may vest in 2016 based on the level of performance during the performance period and subject to continued employment. The number of awards that will ultimately vest is based on the Company’s total shareholder return over the three-year performance period ended December 31, 2015 relative to the total shareholder return of a peer group of companies during the same period. The weighted-average grant date fair value of $45.01 per award was determined using a Monte Carlo simulation model, which assumed a risk-free rate of 0.4%, an expected life of 3.0 years and historical volatilities that ranged from 23% to 64%. As these awards include a market condition, the Company records compensation expense for these awards based on the grant date fair value of the award recognized ratably over the measurement period.

During 2012, the Company granted 104,500 additional restricted stock units to certain members of its management team which may vest in 2015 based on the level of performance during the performance period and subject to continued employment. The number of awards that will ultimately vest is based on the Company’s total shareholder return over the three-year performance period ended December 31, 2014 relative to the total shareholder return of the Russell 2000 Index during the same period. The weighted-average grant date fair value of $39.88 per award was determined using a Monte Carlo simulation model, which assumed a risk-free rate of 0.54%, an expected life of 3.0 years and historical volatilities that ranged from 15% to 238%. As these awards include a market condition, the Company records compensation expense for these awards based on the grant date fair value of the award recognized ratably over the measurement period.

During 2011, the Company granted 67,400 restricted stock units to certain members of its management team which will vest in 2014 based on Company performance relative to the annual budgets approved by the Company’s board of directors. The Company began recognizing compensation expense related to the weighted-average grant-date fair value of $44.39 for these awards in the first quarter of 2013 when the 2013 budget was approved and the key terms and conditions of the awards was deemed to be established and a grant date had occurred.

A summary of the status of the Company’s Restricted Stock Awards as of December 31, 2013 and changes during the year ended December 31, 2013, is presented below:


Restricted Stock Awards	Shares			Weighted Average Grant-Date Fair Value
Nonvested shares at January 1, 2013		574,933		$	31.49
Granted (1)		202,528			43.56
Vested		(72,166	)		24.99
Canceled		(95,068	)		27.72

Nonvested shares at December 31, 2013		610,227			34.20

(1)

As a result of the Company’s payment of regular dividends during 2013, the Company awarded approximately 10,000 additional restricted stock units as an adjustment to outstanding restricted stock units. The additional restricted stock units are not included in the calculation of the weighted average grant-date fair value of awards granted in 2013.

The fair value of all Restricted Stock Awards that vested during 2013, 2012 and 2011 was $3.2 million, $15.6 million and $3.3 million, respectively.

As of December 31, 2013, there was $8.2 million of total unrecognized compensation cost related to stock options and restricted stock units granted under the Company’s equity incentive plans. That cost is expected to be recognized over a weighted-average period of 2.0 years.

In 2012, in connection with the termination of certain employee positions as a result of the REIT conversion discussed in Note 2, the Company cancelled approximately 167,500 stock options with a weighted average exercise price of $22.02 and approximately 401,000 restricted stock units with a weighted average grant date fair value of $29.76 per award. As a result of these cancellations, the Company reversed approximately $2.1 million in compensation costs during 2012, which are included in REIT conversion costs in the accompanying consolidated statements of operations.

The compensation cost that has been charged against pre-tax income for all of the Company’s stock-based compensation plans, including the reversal of compensation costs discussed above, was $11.6 million, $9.0 million, and $10.2 million for 2013, 2012, and 2011, respectively. The total income tax benefit recognized in the accompanying consolidated statements of operations for all of the Company’s stock-based employee compensation plans was $3.0 million, $3.2 million, and $3.7 million for 2013, 2012, and 2011, respectively.

Cash received from option exercises under all stock-based employee compensation arrangements for 2013, 2012, and 2011 was $5.2 million, $25.1 million, and $4.5 million, respectively. The actual tax benefit realized from exercise, vesting or cancellation of the stock-based employee compensation arrangements during 2013, 2012, and 2011 totaled $1.0 million, $5.2 million, and $0.7 million, respectively, and is reflected as an adjustment to either additional paid-in capital in the accompanying consolidated statements of stockholders’ equity or as a reduction to deferred tax liabilities in the accompanying consolidated balance sheets.