Stock-Based Compensation

Our shareholders approved the 2011 Stock Incentive Plan (the “2011 Plan”) at our Annual Meeting of Shareholders in December 2011. The 2011 Plan replaced the 1973 Non-Qualified Stock Option Plan, as amended, and the 2003 Incentive Stock Plan (the “Prior Plans”). No new awards will be made under the Prior Plans and outstanding awards will remain outstanding under the Prior Plans until settled. Under the 2011 Plan, we may grant awards of non-qualified stock options, incentive stock options, restricted stock, stock units, performance shares, performance units and other incentives payable in cash or in shares of our common stock to officers, employees or members of the Board of Directors. We are authorized to grant an aggregate of 1,355,764 shares under the 2011 Plan. As of December 31, 2014, there were 973,588 available shares for issuance of future grants of awards under the 2011 Plan. As of December 31, 2014, there were 185,450 shares representing outstanding awards under the Prior Plans and 306,784 shares representing outstanding awards under the 2011 Plan. We may issue new shares or use shares held in treasury to deliver shares to employees for our equity grants or upon exercise of non-qualified stock options.

The following table summarizes the pre-tax stock-based compensation expense included in reported net income (in thousands):



	Years ended December 31,
	2014		2013		2012
Cost of revenue	$	1,609	$	1,163	$	1,294
Selling, general and administrative expenses	519		465		497
Total stock-based compensation expense	$	2,128	$	1,628	$	1,791

We recognized a deferred income tax benefit of $0.7 million, $0.5 million and $0.6 million, respectively, during the years ended December 31, 2014, 2013, and 2012 associated with the compensation expense recognized in our consolidated financial statements. As of December 31, 2014, we had non-qualified stock options and restricted stock units outstanding under these plans as discussed below.

Non-Qualified Stock Options

Non-qualified stock options are granted with an exercise price not less than the fair market value of our common stock at the date of grant, vest over a period up to ten years, and expire at various terms up to ten years from the date of grant.

Summarized information for our non-qualified stock options is as follows:



Stock Options	Number of options		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding at December 31, 2013	569,300		$	9.41
Granted	—		—
Exercised	(337,150	)	7.91
Forfeited	(3,000	)	15.25
Expired	—		—
Outstanding at December 31, 2014	229,150		$	11.54	1.86	$5,132,000
Stock options expected to vest	220,250		$	11.49	1.84	$4,943,000
Exercisable at December 31, 2014	61,850		$	13.99	2.29	$1,233,000

Summarized weighted average information for non-qualified stock options granted to certain key personnel during the year ended December 31, 2012 is as follows (no stock options were granted during the years ended December 31, 2014 and 2013):



	2012
Number of options granted	54,500
Exercise price	$	17.57
Vesting term	4.5 years
Contractual term	5.5 years
Grant-date fair value	$	6.80

Black-Scholes assumptions:
Expected term	4.2 years
Expected stock price volatility	48.3		%
Risk-free interest rate	0.61		%
Expected dividend yield	—

As of December 31, 2014, we had approximately $0.3 million of unrecognized compensation cost related to the unvested portion of outstanding stock options to be recognized on a straight-line basis over a weighted average remaining service period of approximately 1.5 years.

We received cash for the exercise price associated with stock options exercised of $0.1 million, $0.1 million, and $0.3 million during the years ended December 31, 2014, 2013 and 2012, respectively. During the years ended December 31, 2014 ,2013, and 2012 we settled 327,100, 44,800, and 782,980 outstanding stock options, respectively, held by our employees by issuing 140,544, 17,048 and 214,624 fully vested shares, respectively, which represented the fair value of those stock options upon settlement, net of required income tax withholdings. The total intrinsic value realized by participants on stock options exercised and/or settled was $7.0 million, $0.7 million and $6.5 million during the years ended December 31, 2014, 2013 and 2012, respectively. During the years ended December 31, 2014, 2013 and 2012, we realized income tax benefits of $2.5 million, $0.4 million and $2.0 million, respectively, related to stock option exercises and restricted stock vesting, which are reflected as an increase to additional paid-in capital on the consolidated statements of stockholders’ equity.

Restricted Stock Units

In addition to stock options, we issue restricted stock units to key employees and members of the Board of Directors based on meeting certain service goals. The stock units vest to the recipients at various dates, up to five years, based on fulfilling service requirements. We recognize the value of the market price of the underlying stock on the date of grant to compensation expense over the requisite service period. Upon vesting, the stock units are settled in shares of our common stock. Summarized share information for our restricted stock units is as follows:



	Year ended December 31, 2014		Weighted average grant date fair value
	(In shares)		(In dollars)
Outstanding and unvested, beginning of period	244,031		$	22.17
Granted	81,013		30.61
Vested	(58,864	)	21.28
Forfeited	(3,096	)	19.28
Outstanding and unvested, end of period	263,084		$	25.00
Restricted stock units expected to vest	250,823		$	25.11

The total intrinsic value realized by participants upon the vesting of restricted stock units was $1.6 million, $1.2 million and $1.7 million during the years ended December 31, 2014, 2013 and 2012, respectively. As of December 31, 2014, we had unrecognized compensation cost of $5.8 million related to the unvested portion of our outstanding restricted stock units to be recognized over a weighted average remaining service period of 3.5 years.