Share-Based Compensation

In connection with our initial public offering, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (the “Plan”), which provides for the grant of up to a maximum of 5.0 million shares of restricted stock, stock options, restricted stock units and other equity-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing services for the Company, are eligible for grants under the Plan.

During the three months ended June 30, 2014, pre-tax share-based compensation costs charged against income were $1.9 million and the related income tax benefit recognized was $0.7 million. During the three months ended June 30, 2013, pre-tax share-based compensation costs charged against income were $1.2 million and the related income tax benefit recognized was $0.5 million.

Restricted Shares

Restricted shares granted to employees under the Plan generally vest in three to five years, primarily upon the attainment of certain time vesting thresholds, and may also be contingent on the attainment of certain performance goals by the Company, including revenue and earnings before income taxes, depreciation and amortization targets. The restricted share awards provide for accelerated vesting if there is a change of control, as defined in the Plan. The restricted stock units granted to employees generally vest in their entirety on the three-year anniversary of the date of the grant, unless specified differently on the date of grant. Termination of employment prior to vesting will result in forfeiture of the restricted stock units. The restricted stock units granted to directors will vest in their entirety one year after the date of grant so long as the membership on the Board of Directors continues through the vesting date, with the settlement in common stock to occur on the earliest of the director's death, disability or six month anniversary of the date on which the director's Board membership ceases for reasons other than death or disability. Upon vesting, the units will be settled in shares of our common stock.

On May 12, 2014, the Compensation Committee of our Board of Directors granted 96,638 restricted stock units to certain executive officers and employees under the Plan. Of those grants, 75,638 restricted stock units vest in their entirety on the three-year anniversary of the date of grant and 21,000 restricted stock units vest 33.3% per year over three years.

The fair value of the restricted stock units is determined using the closing price of our common stock on the day of grant. The weighted-average grant-date fair value of restricted stock units granted during the three months ended June 30, 2014 and 2013 was $33.50 and $29.94, respectively.

A summary of the Company's restricted shares granted under the Plan is presented below:



Restricted Shares	Shares (in thousands)		Weighted- Average Grant-Date Fair Value
Three months ended June 30, 2013
Outstanding at March 31, 2013	421.3		$	11.01
Granted	113.6		29.94
Vested and issued	(27.7	)	9.03
Forfeited	(3.6	)	13.24
Outstanding at June 30, 2013	503.6		15.38
Vested at June 30, 2013	83.1		9.63

Three months ended June 30, 2014:
Outstanding at March 31, 2014	437.5		$	16.76
Granted	96.6		33.50
Vested and issued	(93.7	)	15.12
Forfeited	(14.4	)	20.78
Outstanding at June 30, 2014	426.0		20.78
Vested at June 30, 2014	69.6		9.34

Options

The Plan provides that the exercise price of options granted shall be no less than the fair market value of the Company's common stock on the date the options are granted. Options granted have a term of no greater than ten years from the date of grant and vest in accordance with a schedule determined at the time the option is granted, generally three to five years. The option awards provide for accelerated vesting if there is a change in control, as defined in the Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model that uses the assumptions noted in the table below. Expected volatilities are based on the historical volatility of our common stock and other factors, including the historical volatilities of comparable companies. We use appropriate historical data, as well as current data, to estimate option exercise and employee termination behaviors. Employees that are expected to exhibit similar exercise or termination behaviors are grouped together for the purposes of valuation. The expected terms of the options granted are derived from management's estimates and consideration of information derived from the public filings of companies similar to us and represent the period of time that options granted are expected to be outstanding. The risk-free rate represents the yield on U.S. Treasury bonds with a maturity equal to the expected term of the granted option. On May 12, 2014, the Compensation Committee of our Board of Directors granted stock options to acquire 307,490 shares of our common stock to certain executive officers and employees under the Plan. The stock options will vest 33.3% per year over three years and are exercisable for up to ten years from the date of grant. These stock options were granted at an exercise price of $33.50 per share, which is equal to the closing price for our common stock on the day of the grant. Termination of employment prior to vesting will result in forfeiture of the unvested stock options. Vested stock options will remain exercisable by the employee after termination, subject to the terms of the Plan.

The weighted-average grant-date fair value of the options granted during the three months ended June 30, 2014 and 2013 was $15.93 and $13.94, respectively.



	Three Months Ended June 30,
	2014			2013
Expected volatility	47.3		%	48.0		%
Expected dividends	$	—		$	—
Expected term in years	6.0			6.0
Risk-free rate	2.2		%	1.3		%

A summary of option activity under the Plan is as follows:



Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Three months ended June 30, 2013:
Outstanding at March 31, 2013	1,386.4		$	10.43
Granted	227.7		29.94
Exercised	(25.0	)	12.40
Forfeited or expired	(8.0	)	13.24
Outstanding at June 30, 2013	1,581.1		13.19		6.2	$	9,840
Exercisable at June 30, 2013	515.9		11.27		7.2	3,715

Three months ended June 30, 2014:
Outstanding at March 31, 2014	994.9		$	15.24
Granted	307.5		33.50
Exercised	(93.8	)	13.80
Forfeited or expired	(31.6	)	25.49
Outstanding at June 30, 2014	1,177.0		19.85		7.8	$	16,527
Exercisable at June 30, 2014	375.1		15.23		7.3	6,998

The aggregate intrinsic value of options exercised in the three months ended June 30, 2014 was $1.9 million.

At June 30, 2014, there were $8.7 million of unrecognized compensation costs related to nonvested share-based compensation arrangements under the Plan, based on management's estimate of the shares that will ultimately vest. We expect to recognize such costs over a weighted-average period of 1.1 years. The total fair value of options and restricted shares vested during the three months ended June 30, 2014 and 2013 was $4.7 million and $1.9 million, respectively. For the three months ended June 30, 2014 and 2013, cash received from the exercise of stock options was $1.3 million and $0.3 million, respectively, and we realized $1.0 million and $0.5 million, respectively, in tax benefits from the tax deductions resulting from these option exercises. At June 30, 2014, there were 1.2 million shares available for issuance under the Plan.