SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION

Stock Repurchase Plan

On May 18, 2016, our shareholders approved a new share repurchase program, which replaced the previous share repurchase program. Under the new program, we are authorized to purchase up to 4.6 million shares of our common stock, based on a limit of 25% of the outstanding shares of common stock on the date of approval at a minimum price of $1.00 per share and a maximum price of $500.00 per share. This is in addition to amounts previously purchased under prior programs. Under the existing and prior programs, we purchased 1.3 million shares of common stock at an average price of $26.94 per share during the nine months ended September 30, 2016 and 1.8 million shares at an average price of $27.90 per share during the nine months ended September 30, 2015 (0.5 million shares at an average price of $28.68 per share for the third quarter of 2016 and 0.2 million shares at an average price of $26.88 per share for the third quarter of 2015). As of September 30, 2016, approximately 4.0 million shares of common stock remain available for repurchase under the new program. Our senior secured term loan limits the amount we can spend on share repurchases and may prevent repurchases in certain circumstances. As of September 30, 2016, approximately $379 million was available to repurchase our common stock under our senior secured term loan.

Share-Based Compensation

We issue share-based awards in the form of stock options and certain other equity-based awards for certain employees, officers and directors. We recorded share-based compensation expense of $4.7 million and $3.3 million for the nine months ended September 30, 2016 and 2015, respectively ($1.1 million and $1.9 million for the third quarter of 2016 and 2015, respectively). As of September 30, 2016, estimated unrecognized compensation costs related to share-based awards amounted to $7.3 million, which we expect to recognize over a weighted average remaining requisite service period of approximately 2.23 years.

Stock Options

Stock option grants are composed of a combination of service-based, market-based and performance-based options.

Service-Based Options. These options generally vest over three or four years with equal annual cliff-vesting and expire on the earlier of ten years after the date of grant or following termination of service. A total of 0.9 million service-based awards were outstanding at September 30, 2016.

Market-Based Options. These option grants generally have two components, each of which vests only upon the achievement of certain criteria. The first component, which we refer to internally as “ordinary performance” grants, consists of two-thirds of the market-based grant and begins to vest if the stock price is at least double the exercise price, as long as the stock price realizes a compounded annual gain of at least 20% over the exercise price. The remaining third of the market-based options, which we refer to internally as “extraordinary performance” grants, begins to vest if the stock price is at least triple the exercise price, as long as the stock price realizes a compounded annual gain of at least 25% over the exercise price. Market-based awards vest in three or four year installments with the first installment vesting upon the achievement of the criteria and the remaining installments vesting thereafter in annual installments. Market-based options generally expire on the earlier of ten years after the date of grant or following termination of service, unless the performance criteria is met prior to termination of service or in the final three years of the option term, in which case vesting will generally continue in accordance with the provisions of the award agreement. A total of 1.1 million market-based awards were outstanding at September 30, 2016.

Performance-Based Options. These option grants begin to vest upon the achievement of certain business unit specific financial measures. Generally, 25% of the awards vest upon the achievement of the performance criteria and the remaining 75% vest thereafter in three equal annual installments. The award of performance-based options is adjusted based on the level of achievement specified in the award agreements. If the performance criteria achieved is below a certain threshold, the award is cancelled. The options expire on the earlier of ten years after the date of grant or following termination of service. A total of 0.1 million performance-based awards were outstanding at September 30, 2016.

The Company granted 0.1 million stock options (at a weighted average exercise price of $29.22 per share) and 0.7 million stock options (at a weighted average exercise price of $23.19 per share) during the nine months ended September 30, 2016 and 2015, respectively.

The fair values of the service-based and performance-based options were determined using the Black-Scholes option pricing model and the fair value of the market-based options was determined using a lattice (binomial) model. The following assumptions were used to determine the fair value as of the grant date:



	Nine months ended September 30, 2016		Nine months ended September 30, 2015
	Black-Scholes	Binomial	Black-Scholes	Binomial

Risk-free interest rate (%)	1.25 - 1.89	0.23 - 1.97	1.50 - 1.78	0.02 - 2.26
Expected stock price volatility (%)	59.75 - 62.14	59.76 - 62.14	55.06 - 58.58	55.06 - 57.60
Expected dividend yield	—	—	—	—
Expected option life (in years)	6.00 - 6.25	4.54 - 4.88	6.00 - 6.25	4.10 - 4.88
Fair value	$11.15 - $18.60	$11.06 - $19.27	$10.01 - $17.34	$9.91 - $16.13

We determined the expected option life of all service-based stock option grants using the simplified method. We use the simplified method because we believe that our historical data does not provide a reasonable basis upon which to estimate expected option life.

The following table summarizes the weighted average grant date fair value of stock options granted per share, the total intrinsic value of stock options exercised and the grant date fair value of stock options that vested during the period presented:



	Nine months ended September 30,
(in thousands, except per share amounts)	2016		2015

Weighted average grant date fair value of stock options granted per share	$	16.85	$	12.62
Intrinsic value of options exercised	17,280		232
Grant date fair value of stock options that vested	2,372		1,195

The following table summarizes the activity related to our stock options:



	Number of options		Weighted average exercise price		Weighted average contractual term (in years)	Aggregate intrinsic value (in thousands)

Outstanding at December 31, 2015	3,163,125		$	20.13	4.94	$	35,842
Granted	142,654		29.22
Exercised	(1,110,193	)	9.57
Forfeited	(115,539	)	36.53

Outstanding at September 30, 2016	2,080,047		$	25.48	5.55	$	22,595

Exercisable at September 30, 2016	1,274,537		$	20.17	3.62	$	18,372

Other Share-Based Awards

The Company’s other share-based and similar types of awards are composed of restricted shares and, through August 29, 2016, Equity Appreciation Rights (“EAR”). Effective August 29, 2016, the EAR plans were terminated.

The restricted shares are service-based awards that vest over one to four years with either annual cliff-vesting, vesting of all of the restricted shares at the end of the vesting period or vesting beginning after two years of service. The Company granted 13 thousand restricted shares (at a weighted average price of $26.66 per share) during the nine months ended September 30, 2016.

The following table summarizes the activity related to our restricted shares:



	Number of restricted shares

Outstanding at December 31, 2015	272,326
Granted	12,878
Issued	(18,774	)
Forfeited	(15,400	)

Outstanding at September 30, 2016	251,030

Share-based compensation expense for stock options and restricted shares is recorded net of estimated forfeiture rates ranging from 0% to 40%.