Stockholders’ Equity

Stock Option Plan

In June 2011, the Company adopted the 2011 Stock Plan. The 2011 Stock Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock and restricted stock units to employees, directors and consultants. As of June 30, 2014, 3.1 million shares were reserved for future grants under the 2011 Stock Plan.

A summary of the activities related to the Company’s stock option plans is as follows:



			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in Thousands)
Balances as of December 31, 2013	3,406,317		3,526,898		$	95.25
Granted	(265,146	)	265,146		387.16
Exercised			(484,014	)	96.93
Balances as of June 30, 2014	3,141,171		3,308,030		118.40		5.94	$	1,066,052
Vested and exercisable at June 30, 2014			3,308,030		118.40		5.94	$	1,066,052

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the second quarter of 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2014. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the three months ended June 30, 2014 and 2013 was $46.2 million and $68.3 million, respectively. The total intrinsic value of options exercised for the six months ended June 30, 2014 and 2013 was $147.7 million and $118.3 million, respectively.

Cash received from option exercises for the three months ended June 30, 2014 and 2013 was $14.5 million and $28.8 million, respectively. Cash received from option exercises for the six months ended June 30, 2014 and 2013 was $46.9 million and $68.0 million, respectively.

Stock-Based Compensation

The following table summarizes the assumptions used to value stock option grants using the lattice-binomial model:



	Three Months Ended				Six Months Ended
	June 30, 2014		June 30, 2013		June 30, 2014		June 30, 2013
Dividend yield	—	%	—	%	—	%	—	%
Expected volatility	45	%	53	%	45% - 48%		53% - 54%
Risk-free interest rate	2.66	%	1.88	%	2.66% - 2.83%		1.87% - 1.88%
Suboptimal exercise factor	2.66 - 4.20		2.39 - 3.61		2.66 - 4.20		2.33 - 3.61

The Company bifurcates its option grants into two employee groupings (executive and non-executive) and considers several factors, including the historical option exercise behavior, the contractual terms and vesting periods of the options granted, in determining the suboptimal exercise factor.

The weighted-average fair value of employee stock options granted during the three months ended June 30, 2014 and 2013 was $196.93 and $110.67 per share, respectively. The weighted-average fair value of employee stock options granted during the six months ended June 30, 2014 and 2013 was $207.85 and $87.87 per share, respectively.

Stock-based compensation expense related to stock option plans was $29.3 million and $18.0 million for the three months ended June 30, 2014 and 2013, respectively. Stock-based compensation expense related to stock option plans was $55.1 million and $35.7 million for the six months ended June 30, 2014 and 2013, respectively. The total income tax benefit recognized in the income statement related to stock option plans was $11.2 million and $6.9 million for the three months ended June 30, 2014 and 2013, respectively. The total income tax benefit recognized in the income statement related to stock option plans was $21.1 million and $13.7 million for the six months ended June 30, 2014 and 2013, respectively.