Note

– Stock-Based Compensation

Under the Company

’s

2012

Long-Term Incentive Plan, as amended (the

2012

Plan), the Company has the ability to grant stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, other stock-based awards and cash incentive awards. Awards under the

2012

Plan have a maximum term of

ten

years from the date of grant. The compensation committee

may

provide that the vesting or payment of any award will be subject to the attainment of specified performance measures in addition to the satisfaction of any continued service requirements and the compensation committee will determine whether such measures have been achieved. The per-share exercise price of stock options and SARs granted under the

2012

Plan generally

may

not

be less than the fair market value of a share of our common stock on the date of the grant.

Employee Stock Purchase Plan

The Company

’s

2012

Employee Stock Purchase Plan (ESPP) allows eligible employees to purchase a variable number of shares of the Company’s common stock each offering period at a discount through payroll deductions of up to

percent of their eligible compensation, subject to plan limitations. The ESPP provides for

six

-month offering periods with a single purchase period ending

May

and

November

15,

respectively. At the end of each offering period, employees are able to purchase shares at

percent of the lower of the fair market value of the Company’s common stock on the

first

trading day of the offering period or on the last trading day of the offering period.

Stock-Based Compensation Expense

Stock-based compensation

expense was

$2.2

million and

$1.8

million for the

three

months ended

June 30, 2017

and

2016,

respectively, and

$4.0

million and

$3.5

million for the

six

months ended

June 30, 2017

and

2016,

respectively.

Stock Options

The following table summarizes stock option activity during the

six

months ended

June 30, 2017:


				Weighted-
				Average
	Stock Options			Exercise Price
Options outstanding at December 31, 2016		569,639		$	45.00
Granted		43,095			58.35
Exercised		(88,114	)		31.71
Forfeited		(16,943	)		58.17
Options outstanding at June 30, 2017		507,677		$	48.00

Exercisable at June 30, 2017		318,140		$	40.42

The outstanding options generally have a term of

ten

years. For employees, options granted become exercisable ratably over the vesting period, which is generally a

five

-year period beginning on the

first

anniversary of the grant date, subject to the employee

’s continuing service to the Company. For directors, options generally become exercisable in full on the

first

anniversary of the grant date.

The weighted-average grant date fair value of options th

at were granted during the

six

months ended

June 30, 2017

was

$27.57.

The following table provides the assumptions used in the Black-Scholes pricing model valua

tion of options during the

six

months ended

June 30, 2017

and

2016:

	Six Months Ended June 30,
	2017		2016
Risk-free interest rate		2.24%		1.53	-	1.68%
Expected life (years)		6.50			6.50
Expected volatility		44.68%		44.38	-	45.93%
Expected dividend yield		0%			0%

As of

June 30, 2017,

there was

$4.8

million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted-average period of

3.0

years.

Restricted Stock

Restricted stock awards

are share-settled awards and restrictions lapse ratably over the vesting period, which is generally a

five

-year period, beginning on the

first

anniversary of the grant date, subject to the employee's continuing service to the Company. For directors, restrictions generally lapse in full on the

first

anniversary of the grant date.

The following table summarizes restricted

stock activity during the

six

months ended

June 30, 2017:

	Restricted			Weighted- Average Grant Date Fair Value
	Stock			Per Share
Restricted stock at December 31, 2016		215,105		$	62.78
Granted		197,649			61.60
Restrictions lapsed		(55,139	)		63.61
Forfeited		(9,570	)		63.76
Restricted stock at June 30, 2017		348,045		$	61.95

As of

June 30, 2017,

there was

$20.4

million of unrecognized compensation expense related to non-vested restricted stock, which is expected to be recognized over a weighted-average period of

4.0

years.

Performance Stock

PSUs are expressed in terms of a target number of PSUs, with anywhere between

percent

and

150

percent of that target number capable of being earned and vesting at the end of a

three

-year performance period depending on the Company’s performance in the final year of the performance period and the award recipient’s continued employment. As of

June 30, 2017,

the Company is accruing stock-based compensation expense for the PSUs at

100

percent.

The following table summarizes performance stock activity during the

six

months ended

June 30, 2017:

			Weighted-
			Average
			Grant Date
	Performance		Fair Value
	Stock		Per Share
Performance stock at December 31, 2016		-	$	-
Granted		25,707		58.35
Restrictions lapsed		-		-
Forfeited		-		-
Performance stock at June 30, 2017		25,707	$	58.35

Employee Stock Purchase Plan

The following table presents the assumptions used to estimate the fair value of the ESPP during the

six

months ended

June 30, 2017

and

2016:


	Six Months Ended June 30,
	2017				2016
Risk-free interest rate		0.59%	-	0.97%		0.39	-	0.56%
Expected life (months)			6.00				6.00
Expected volatility		34.51%	-	39.51%		29.41	-	49.13%
Expected dividend yield			0%				0%