STOCK-BASED COMPENSATION

2015 Long-Term Incentive Plan

On April 28, 2015, our shareholders approved our 2015 Long-Term Incentive Plan (the “2015 Plan”), which replaced our 2005 Long-Term Incentive Plan that expired in 2015. The 2015 Plan is administered by the Compensation Committee of the Board of Directors and authorizes us to grant various types of stock-based awards including: stock options, stock appreciation rights, RSAs, RSUs and PSUs. Stock options granted under the 2015 Plan shall not have an exercise price less than the fair market value of our common stock on the date of the grant. The exercise price of a stock option or stock appreciation right may not be reduced without shareholder approval. Stock options generally vest over periods of three or four years of continuous service, commencing on the date of grant. Stock options granted under the 2015 Plan have a seven-year contractual term.

Upon adoption, there were approximately 4.8 million shares available for issuance under the 2015 Plan. The number of shares available for issuance upon adoption of the 2015 Plan included new shares approved plus any shares of common stock which were previously reserved for issuance under our preceding plan, and were not subject to grant as of April 28, 2015 or as to which the stock-based compensation award is forfeited on or after April 28, 2015. The number of shares available for issuance is reduced by (i) two shares for each share delivered in settlement of any stock appreciation rights, for each share of RSA, RSU or PSU award, and (ii) one share for each share delivered in settlement of a stock option award. In no event shall more than 1.0 million aggregate shares of common stock subject to stock options, stock appreciation rights, RSA, RSU or PSU awards be granted to any one participant in any one year under the 2015 Plan. At December 31, 2015, we had 4.5 million shares available for future grant under our 2015 Plan, and a total of 5.4 million shares of our common stock are reserved for future issuance pursuant to the 2015 Plan and our previous plan combined.

Stock Option Activity

Stock option activity was as follows (shares in thousands):



	Options Outstanding		Weighted- Average Exercise Price
Outstanding at December 31, 2014	798		$	4.41
Granted	18		16.21
Forfeited, canceled or expired	(12	)	15.40
Exercised	(284	)	3.70
Outstanding at December 31, 2015	520		$	5.01

Certain information regarding options outstanding at December 31, 2015 was as follows:



	Options Outstanding		Options Exercisable		Options Vested and Expected to Vest
Number (in thousands)	520		373		520
Weighted-average exercise price	$	5.01	$	3.47	$	5.01
Aggregate intrinsic value (in thousands)	$	6,099	$	4,940	$	6,099
Weighted average remaining contractual term (in years)	3.9		3.4		3.9

RSU Activity

Compensation expense for RSUs is recognized over the estimated vesting period. Following is a summary of RSU activity (shares in thousands):



	RSUs Outstanding		Weighted- Average Grant Date Fair Value per Share
Outstanding at December 31, 2014	87		$	5.93
Granted	69		17.58
Vested	(46	)	4.54
Outstanding at December 31, 2015	110		$	13.73

PSU Activity

Compensation expense for PSUs is recognized over the estimated requisite service period based on the number of PSUs ultimately expected to vest.

In February and August 2012, we granted PSU awards to certain executive officers covering a total of 82,000 shares of our common stock. The PSUs vested based on achievement of certain operating income and return on asset goals established for a three-year performance period. The number of PSUs that vest can range from 60% of the PSUs if minimum thresholds are achieved to a maximum of 150%. These awards vested in full at the 150% maximum achievement, net of forfeitures, for a total of 95,250 shares.

In May 2013, we granted PSU awards to certain of our executive officers covering a total of 24,500 shares of our common stock. The PSUs vest based on achievement of certain operating income and return on asset goals established for a three-year performance period. The number of shares vesting under the PSU awards following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%. These awards are expected to vest in full at the 150% maximum achievement, with the exception of any forfeitures.

In February 2014, we granted PSU awards to certain of our executive officers covering a total of 82,494 shares of our common stock. The PSUs vest based on achievement of goals established for operating income and revenue growth for a three-year performance period. The number of shares vesting under the PSU awards following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%.

In April and September 2015, we granted PSU awards to certain of our executive officers and management team covering a total of 56,820 shares of our common stock. The PSUs vest based on achievement of goals established for certain operating income and return on asset criteria for a three-year performance period. The number of shares vesting under the PSU awards following conclusion of the performance period will be determined based on the level at which the financial goals are achieved. The number of shares vesting can range from 60% of the PSU awards if minimum thresholds are achieved to a maximum of 150%.

In December 2015, we granted PSU awards to a certain executive officer and management team personnel covering a total of 117,230 shares of our common stock. The PSUs vest based on achievement of certain operating income and operating margin goals for a three-year performance period. The number of shares vesting under the PSU awards following conclusion of the performance period will be determined based on the level at which the financial goals are achieved.

Following is a summary of PSU activity (shares in thousands):



	PSUs Outstanding		Weighted- Average Grant Date Fair Value per Share
Outstanding at December 31, 2014	166		$	5.97
Granted and additional goal shares awarded	206		14.87
Vested	(95	)	2.85
Outstanding at December 31, 2015	277		$	13.67

Stock-Based Compensation

We receive income tax deductions as a result of the exercise of certain stock options and vesting of RSUs and PSUs. Stock-based compensation expense, primarily included in general and administrative expense, was as follows (in thousands):



	Year Ended December 31,
	2015		2014		2013
Stock options	$	327	$	592	$	337
RSUs	544		121		54
PSUs	575		353		63
ESPP	38		—		—
	$	1,484	$	1,066	$	454

Certain other information regarding our stock-based compensation was as follows (in thousands, except per share amounts):



	Year Ended December 31,
	2015		2014		2013
Weighted average grant-date per share fair value of stock options granted	$	8.94	$	5.36	$	4.37
Total intrinsic value of stock options exercised	4,142		736		451
Fair value of RSUs vested	673		872		545
Fair value of PSUs vested	1,454		—		386

As of December 31, 2015, unrecognized compensation expense for outstanding, but unvested stock option awards was $0.4 million, which is expected to be recognized over a weighted average period of 1.2 years.

Employee Stock Purchase Plan

On April 28, 2015, our shareholders approved our Employee Stock Purchase Plan (the “ESPP”). The ESPP is administered by the Compensation Committee of the Board of Directors and provides a means by which eligible employees may be given an opportunity to purchase shares of our common stock at a discount using payroll deductions. The ESPP authorizes the issuance of up to 0.5 million shares of our common stock, subject to adjustment as provided in the ESPP for stock splits, stock dividends, recapitalizations and other similar events.

Pursuant to the ESPP, and subject to certain limitations specified therein, eligible employees may elect to purchase shares of our common stock in one or more of a series of offerings conducted pursuant to the procedures set forth in the ESPP at a purchase price equal to 90% of the lower of the fair market value of the common stock on the first trading day of the offering period or on the last day of the offering period. Offering periods commence on May 15 and November 15 of each year and are six-months in duration, with the exception of the first offering period in 2015, which was a four-month offering. Purchases under the ESPP may be made exclusively through payroll deductions.

Persons eligible to participate in the ESPP generally include employees who have been employed for at least 12 months prior to the applicable offering date and who, immediately upon purchasing shares under the ESPP, would own directly or indirectly, an aggregate of less than 5% of the total combined voting power or value of all outstanding shares of our common stock.

ESPP activity was as follows (shares in thousands):



	Shares Available for Issuance		Weighted- Average Purchase Price		Weighted-Average Discount per Share
Balance at December 31, 2014	—
Shares upon ESPP adoption	500
Employee shares purchased	(7	)	$	16.69	$	1.85
Balance at December 31, 2015	493

Assumptions used in calculating the fair value of stock option grants and employee stock purchases were as follows:



	Year Ended December 31,
	2015		2014	2013
	ESPP	Options	Options	Options
Dividend yield	—%	—%	—%	—%
Risk-free interest rate	0.1%	1.6%	1.7%	0.9%
Expected life (years)	N/A	4.28	4.75	4.75
Expected volatility	43%	71%	80%	89%

Dividend yield is based on our current expectation that no dividend payments will be made in future periods.

Risk-free interest rate is the U.S. Treasury zero-coupon rate, as of the grant date, for issues having a term approximately equal to the expected life of the stock option.

Expected life is the period of time over which stock options are expected to remain outstanding. We calculate expected term based on the average of the sum of the vesting periods and the full contractual term.

Expected volatility is the percentage amount by which the price of our common stock is expected to fluctuate annually during the estimated expected life for stock options. Expected price volatility is calculated using historical daily closing prices over a period matching the weighted-average expected life, as management believes such changes are the best indicator of future volatility.