NOTE 20—STOCK COMPENSATION PLANS

The Company issues stock options and restricted stock awards to employees under share-based compensation plans. During the years ended December 31, 2013, 2012 and 2011, total compensation expense related to stock options and restricted stock awards reduced income before taxes by $13.5 million, $12.7 million and $13.5 million, respectively, and reduced net income by $7.9 million, $7.3 million and $7.9 million, respectively.

The Company received $1.7 million and $2.7 million as of December 31, 2013 and 2012, respectively, in cash proceeds from stock option exercises. The net tax benefit recognized in equity for stock compensation plans was $5.5 million for 2013 compared with $462 thousand for 2012.

As of December 31, 2013, there are 4,160,200 shares available to be issued, subject to the Company’s current 1998 Stock Incentive Plan, as amended.

Stock Options—The Company issues fixed stock options to certain employees, officers, and directors. Stock options are issued at the current market price on the date of grant with a three-year or four-year vesting period and contractual terms of 7 or 10 years. The Company issues new shares upon the exercise of stock options.

A summary of activity for the Company’s stock options as of and for the year ended December 31, 2013 is presented below:

				Weighted
		Weighted		Average	Aggregate
		Average		Remaining	Intrinsic
		Exercise		Contractual	Value
	Shares	Price		Term	(In thousands)
Outstanding at beginning of year	677,708	$	28.41
Granted	—	—
Exercised	(91,540)	18.35
Forfeited	(179,437)	37.36
Outstanding at end of year	406,731	$	26.72	0.83 years	$	3,848
Vested or expected to vest at year-end	406,731	$	26.72	0.83 years	$	3,848
Exercisable at year-end	406,731	$	26.72	0.83 years	$	3,848

A summary of changes in unvested stock options and related information for the year ended December 31, 2013 is presented below:

		Weighted
		Average
		Grant Date
		Fair Value
Unvested Options	Shares	(per share)
Unvested at January 1, 2013	14,502	$	3.00
Granted	—	—
Vested	(14,502)	3.00
Forfeited	—	—
Unvested at December 31, 2013	—	$	—

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Year Ended December 31,
	2013(5)	2012(5)	2011
Expected term (1)	N/A	N/A	4 years
Expected volatility (2)	N/A	N/A	78.1%
Expected dividend yield (3)	N/A	N/A	0.2%
Risk-free interest rate (4)	N/A	N/A	1.6%

(1) The expected term (estimated period of time outstanding) of stock options granted was estimated using the historical exercise behavior of employees.

(2) The expected volatility was based on historical volatility for a period equal to the stock option’s expected term.

(3) The expected dividend yield is based on the Company’s prevailing dividend rate at the time of grant.

(4) The risk-free rate is based on the U.S. Treasury strips in effect at the time of grant equal to the stock option’s expected term.

(5) The Company did not issue any stock options during the years ended December 31, 2013 and December 31, 2012

The following table summarizes information about stock options outstanding as of December 31, 2013:

	Options Outstanding				Options Exercisable
		Weighted		Weighted		Weighted
	Number of	Average		Average	Number of	Average
Range of	Outstanding	Exercise		Remaining	Exercisable	Exercise
Exercise Prices	Options	Price		Contractual Life	Options	Price
$10.00 to $14.99	2,365	$	14.95	2.02 years	2,365	$	14.95
$20.00 to $24.99	273,852	21.09		1.13 years	273,852	21.09
$35.00 to $39.99	130,514	38.76		0.16 years	130,514	38.76
$10.00 to $39.99	406,731	$	26.72	0.83 years	406,731	$	26.72

During the years ended December 31, 2013, 2012 and 2011, information related to stock options are presented as follows:

	Year Ended December 31,
	2013		2012		2011
Weighted average grant date fair value of stock options granted during the year(1)	N/A		N/A		$	13.21
Total intrinsic value of options exercised (in thousands)	$	926	$	978	$	2,650
Total fair value of options vested (in thousands)	$	363	$	3,717	$	1,274

(1) The Company did not issue any stock options during the years ended December 31, 2013 and December 31, 2012.

As of December 31, 2013, all stock options are fully vested and all compensation cost related to stock options have been recognized.

Restricted Stock Awards— In addition to stock options, the Company also grants restricted stock awards to directors, officers and employees. The restricted stock awards fully vest after one to five years of continued employment from the date of grant; some of the awards are also subject to achievement of certain established financial goals. The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock when the restrictions are released and the shares are issued. Restricted stock awards are forfeited if officers and employees terminate employment prior to the lapsing of restrictions or if established financial goals are not achieved. The Company records forfeitures of issued restricted stock as treasury share repurchases.

A summary of the activity for the Company’s time-based and performance-based restricted stock awards as of December 31, 2013, including changes during the year then ended, is presented below:

	2013
	Restricted Stock Awards
	Time-Based			Performance-Based
		Weighted			Weighted
		Average			Average
	Shares	Price		Shares	Price
Outstanding at beginning of year	1,512,396	$	16.30	694,838	$	22.43
Granted	70,150	28.55		477,165	25.25
Vested	(1,073,512)	16.38		(171,648)	22.59
Forfeited	(70,526)	17.98		(43,648)	23.98
Outstanding at end of year	438,508	$	17.79	956,707	$	23.74

During 2013 there were no restricted stock granted to outside directors.

Restricted stock awards are valued at the closing price of the Company’s stock on the date of award. The weighted average fair values of time-based restricted stock awards granted during the years ended December 31, 2013, 2012, and 2011 were $28.55, $21.66, and $19.17, respectively. The weighted average fair value of performance-based restricted stock awards granted during the year ended December 31, 2013, 2012 and 2011 were $25.25, $22.05 and $22.25. The total fair value of time-based restricted stock awards vested during 2013, 2012 and 2011 was $29.4 million, $3.5 million and $4.9 million, respectively. The total fair value of performance-based restricted stock award vested during 2013 and 2012 were $4.4 million and $4.7 million, respectively. There were no performance-based restricted stock awards vested during the year ended December 31, 2011.

As of December 31, 2013, total unrecognized compensation cost related to time-based and performance-based restricted stock awards amounted to $3.8 million and $12.8 million, respectively. This cost is expected to be recognized over a weighted average period of 2.67 years and 1.81 years, respectively.

Stock Purchase Plan—The Company adopted the 1998 Employee Stock Purchase Plan (the “Purchase Plan”) providing eligible employees of the Company and its subsidiaries participation in the ownership of the Company through the right to purchase shares of its common stock at a discount. The Purchase Plan allows employees to purchase shares at 90% of the per share market price at the date of exercise, with an annual common stock value purchase limitation of $25,000. As of December 31, 2013, the Purchase Plan qualifies as a non-compensatory plan under Section 423 of the Internal Revenue Code and, accordingly, no compensation expense is recognized under the Purchase Plan.

The Purchase Plan covers a total of 2,000,000 shares of the Company’s common stock. During 2013 and 2012, 53,015 shares totaling $1.4 million and 59,142 shares totaling $1.2 million, respectively, were sold to employees under the Purchase Plan.