STOCK-BASED COMPENSATION

The following costs related to the Company’s stock compensation plans were included in the unaudited condensed consolidated statements of income:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2014		2013		2014		2013
Cost of revenues	$	2,463	$	1,498	$	6,391	$	3,356
Selling, general and administrative expenses	4,962		1,867		10,133		6,435
Total	$	7,425	$	3,365	$	16,524	$	9,791

Equity Plans

2012 Non-Employee Directors Compensation Plan — On January 11, 2012, the Company approved the 2012 Non-Employee Directors Compensation Plan (“2012 Directors Plan”) to be used to issue equity grants to its non-employee directors. The Company authorized 600,000 shares of common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after 10 years and is administered by the Company’s Board of Directors.

2012 Long-Term Incentive Plan — On January 11, 2012, the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”) to be used to issue equity grants to company personnel. As of September 30, 2014, 4,761,397 shares of common stock remained available for issuance under the 2012 Plan. This includes (i) any shares that were available for issuance under the 2006 Plan (as defined below) as of its discontinuance date and that became available for issuance under the 2012 Plan and (ii) any shares that were subject to outstanding awards under the 2006 Plan and have expired or terminated or were cancelled between the discontinuance date of the 2006 Plan and September 30, 2014 and therefore became available for issuance under the 2012 Plan. In addition, up to 1,975,437 shares that are subject to outstanding awards as of September 30, 2014 under the 2006 Plan and that expire or terminate for any reason prior to exercise or that would otherwise have returned to the 2006 Plan’s share reserve under the terms of the 2006 Plan will be available for awards to be granted under the 2012 Plan.

2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan permitted the granting of options to directors, employees, and certain independent contractors. The Compensation Committee of the Board of Directors generally had the authority to select individuals who were to receive options and to specify the terms and conditions of each option so granted, including the number of shares covered by the option, the exercise price, vesting provisions, and the overall option term. In January 2012, the 2006 Plan was discontinued; however, outstanding awards remain subject to the terms of the 2006 Plan and any shares that are subject to an option award that was previously granted under the 2006 Plan and that will expire or terminate for any reason prior to exercise will become again available for issuance under the 2012 Plan. All of the options issued pursuant to the 2006 Plan expire 10 years from the date of grant.

Stock Options

Stock option activity under the Company’s plans is set forth below:



	Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding at January 1, 2014	5,823,536		$	13.99	$	122,003
Options granted	2,373,500		32.33		27,200
Options exercised	(828,756	)	8.54		(29,214		)
Options forfeited/cancelled	(162,829	)	24.41		(3,156		)
Options outstanding at September 30, 2014	7,205,451		$	20.42	$	168,391

Options vested and exercisable at September 30, 2014	2,708,228		$	9.87	$	91,863
Options expected to vest	4,101,056		$	26.58	$	70,579

Aggregate grant-date fair value of stock options issued under the 2012 Plan during the nine months ended September 30, 2014 was $32,414. The options typically vest over four years from the time of grant.

As of September 30, 2014, a total of 35,515 shares underlying options exercised through September 30, 2014, were in transfer with the Company’s transfer agent.

As of September 30, 2014, total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $45,182, and is expected to be recognized over a weighted-average period of 2.1 years. The weighted average remaining contractual term of the outstanding options as of September 30, 2014 was 5.4 years for fully vested and exercisable options and 8.8 years for options expected to vest, respectively.

There were no material changes with respect to the assumptions used in the Black-Scholes option valuation model during the nine months ended September 30, 2014, as compared with the assumptions disclosed in Part II. Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Other Awards

Other awards include awards of restricted stock and restricted stock units (“RSUs”) under the Company’s 2012 Directors Plan and 2012 Plan, as well as certain other individual awards. In addition, the Company has in the past, and may in the future, issue its equity securities to compensate employees of acquired businesses for future services, upon such terms and at such prices as it deems appropriate. Equity-based awards granted in connection with acquisitions of businesses are generally issued in the form of service-based awards and performance-based awards. The awards issued in connection with acquisitions of businesses are subject to the terms and conditions contained in the applicable award agreement and acquisition documents. Summarized activity related to the Company’s service-based awards for the nine months ended September 30, 2014, was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested service-based awards outstanding at January 1, 2014	344,928		$	18.74
Awards granted	432,356		39.93
Awards vested	(67,357	)	(17.62		)
Awards forfeited/cancelled	(16,924	)	20.81
Unvested service-based awards outstanding at September 30, 2014	693,003		$	32.02

During the nine months ended September 30, 2014, the Company issued a total of 7,738 shares of non-vested (“restricted”) common stock under its 2012 Non-Employee Directors Compensation Plan with an aggregate grant date fair value of $325. As of September 30, 2014, aggregate fair value of unvested awards under the 2012 Non-Employee Directors Compensation Plan was $360. This cost is expected to be recognized over the next 1.5 years using the weighted average method.

During the nine months ended September 30, 2014, the Company issued a total of 70,500 RSUs to certain key management personnel under the 2012 Plan. The fair value of the RSUs at the time of grant was $2,085. As of September 30, 2014, the aggregate fair value of unvested RSUs under the 2012 Plan was $1,771. This cost is expected to be recognized over the next 2.3 years using the weighted average method.

During the nine months ended September 30, 2014, the Company granted a total of 354,118 service-based awards in connection with the acquisitions of businesses completed during that period. The aggregate grant date fair value of the awards was $14,590. As of September 30, 2014, a total of 556,240 shares underlying service-based awards with an aggregate fair value of $18,779 were unvested and outstanding in connection with the Company’s acquisitions activity. This cost is expected to be recognized over the next 1.8 years using the weighted average method.

During the nine months ended September 30, 2014, the Company granted performance-based awards in connection with the acquisitions completed during that period. Total number of the awards varies based on attainment of certain performance targets pursuant to provisions of the relevant purchase agreements. Typically, the performance period is three years, with one third of the awards granted, vesting on the first anniversary of the grant. The remaining awards vest in equal installments on the second and third anniversaries of the grant. If an eligible employee leaves the Company prior to a vesting date, the unvested portion of the award will be forfeited, generally. The Company periodically evaluates the achievement of the related performance conditions during requisite service period and the number of shares expected to be delivered, and resulting compensation expense is adjusted accordingly.

Summarized activity related to the Company’s performance-based awards for the nine months ended September 30, 2014, was as follows:



	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Unvested performance-based awards outstanding at January 1, 2014	—		$	—
Awards granted	376,966		38.55
Awards vested	—		—
Awards forfeited/cancelled	(817	)	36.57
Changes in the number of awards expected to be delivered	(46,331	)	31.13
Unvested performance-based awards outstanding at September 30, 2014	329,818		$	39.60

As of September 30, 2014, total unrecognized compensation cost related to unvested performance-based awards was $12,586. That cost is expected to be recognized over the next 1.8 years using the weighted average method.