18. EQUITY-BASED COMPENSATION

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services rendered in exchange for share-based compensation based upon the grant date fair market value. The cost, net of estimated forfeitures, is recognized over the requisite service period, which is generally the vesting period unless service or performance conditions require otherwise. The Company has granted stock options, time-vesting restricted share awards and performance-vesting restricted share awards. The Company used the Black-Scholes Option Pricing Model to value its stock options granted in 2015 and the closing stock price on the date of grant to value its time-vesting restricted share awards granted in 2015, 2014 and 2013 and its performance-vesting restricted share awards granted in 2015. For valuation models used on other prior year grants, see the Other Fair Value Assumptions section.

Total equity compensation expense was $6,527, $2,349 and $6,026 for the years ended December 31, 2015, 2014 and 2013, respectively, and is included in selling, general and administrative expenses and in operating expenses in the accompanying consolidated statements of comprehensive income. Total unrecognized equity compensation expense for all equity compensation awards probable of vesting as of December 31, 2015 was approximately $22,310 which is expected to be recognized over the respective service periods.

The total fair value of shares which vested during the years ended December 31, 2015, 2014 and 2013 was approximately $2,450, $2,410 and $4,820, respectively. The weighted average grant date fair value per share of time-vesting and performance-vesting restricted share awards granted during the years ended December 31, 2015, 2014 and 2013 were $18.76, $24.59 and $29.06 per share, respectively.

The activity related to the Company’s time-vesting and performance-vesting restricted share awards during the year ended December 31, 2015 is as follows:

						Performance-Vesting Restricted shares
	Time-Vesting Restricted shares					Bonus Performance Restricted shares					Long-Term Incentive Performance Restricted shares					2.25x Performance Restricted shares					2.75x Performance Restricted shares
	Shares			Weighted Average Grant Date Fair Value per Share		Shares			Weighted Average Grant Date Fair Value per Share		Shares			Weighted Average Grant Date Fair Value per Share		Shares			Weighted Average Grant Date Fair Value per Share		Shares			Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2014		164,545		$	11.68		—			—		—			—		1,451,453		$	20.96		1,451,453		$	12.61
Granted		968,005		$	18.64		464,896		$	18.99		79,279		$	18.90		—			—		—			—
Vested		(171,495	)	$	14.28		—			—		—			—		—			—		—			—
Forfeited		(77,785	)	$	13.77		(48,901	)	$	18.96		(16,914	)	$	18.96		(80,632	)	$	22.90		(80,632	)	$	15.76
Outstanding at December 31, 2015		883,270		$	18.66		415,995		$	19.00		62,365		$	18.88		1,370,821		$	20.35		1,370,821		$	10.93

The activity related to the Company’s stock option awards during the year ended December 31, 2015 is as follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2014		—			—
Granted		2,411,415		$	19.20
Forfeited		(137,030	)	$	18.96
Outstanding at December 31, 2015		2,274,385		$	19.21		9.31	$	1,436
Exercisable at December 31, 2015		—			—		—		—

The weighted average grant date fair value of stock options granted during the year ended December 31, 2015 was $4.39 per stock option. Key weighted-average assumptions utilized in the Black-Scholes Option Pricing Model for stock options granted during the year ended December 31, 2015 were:

Risk- free interest rate	1.66	%
Expected volatility^(a)	36.71	%
Expected dividend yield	4.37	%
Expected life (in years)^(b)	6.25

^(a)	Due to the Company’s limited history as a public company, the volatility for the Company’s stock at the date of each grant was estimated using the average volatility calculated for a peer group, which is based upon daily price observations over the estimated term of options granted.

^(b)	The expected life was estimated using the simplified method, as the Company does not have sufficient historical exercise data due to the limited period of time its common stock has been publicly traded.

Omnibus Incentive Plan

The Company has reserved 15,000,000 shares of common stock for issuance under the Company’s 2013 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). The Omnibus Incentive Plan is administered by the Compensation Committee of the Board of Directors (the “Board”), and provides that the Company may grant equity incentive awards to eligible employees, directors, consultants or advisors in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, and other stock-based and performance compensation awards. If an award under the Omnibus Incentive Plan terminates, lapses, or is settled without the payment of the full number of shares subject to the award, the undelivered shares may be granted again under the Omnibus Incentive Plan.

For the year ended December 31, 2015, the Company withheld an aggregate of 42,221 shares of its common stock from employees to satisfy minimum tax withholding obligations related to the vesting of restricted stock awards. As a result, these shares were added back to the number of shares of common stock available for future issuance under the Company’s Omnibus Incentive Plan. As of December 31, 2015, there were 10,776,041 shares of common stock available for future issuance under the Company’s Omnibus Incentive Plan.

Bonus Performance Restricted Shares

On March 3, 2015, the Board approved an annual bonus plan (the “2015 Bonus Plan”) for the fiscal year ended December 31, 2015 (the “Fiscal 2015”) under which certain employees are eligible to receive a bonus with respect to Fiscal 2015, payable 50% in cash and 50% in performance-vesting restricted shares (the “Bonus Performance Restricted shares”) based upon the Company’s achievement of specified performance goals with respect to Adjusted EBITDA. The Bonus Performance Restricted shares were granted pursuant to the Omnibus Incentive Plan. Subsequent grants were made in 2015, under the same terms, to newly hired bonus-eligible employees based on their hire date and/or to certain newly promoted employees. As part of the Company’s annual compensation-setting process and in accordance with the Company’s Equity Award Grant Policy (the “Equity Grant Policy”), on February 22, 2016, the Company’s Compensation Committee (the “Compensation Committee”) approved an annual bonus plan (the “2016 Bonus Plan”) for the fiscal year ending December 31, 2016 (the “Fiscal 2016”). The 2016 Bonus Plan contains similar terms as the 2015 Bonus Plan with bonus awards payable 50% in cash and 50% in Bonus Performance Restricted shares and is based upon the Company’s achievement of specified performance goals with respect to Fiscal 2016 Adjusted EBITDA. Pursuant to the Equity Grant Policy, the Bonus Performance Restricted shares related to the 2016 Bonus Plan will be granted effective as of March 1, 2016, which is the second business day following the filing of this Annual Report on Form 10-K.

In accordance with ASC 718, equity compensation expense is not recorded until the performance condition is probable of being achieved. Based on the Company’s Fiscal 2015 Adjusted EBITDA results, the Bonus Performance Restricted shares are not considered probable of vesting as of December 31, 2015; therefore, no equity compensation expense has been recorded related to these shares and these shares will forfeit in the first quarter of 2016.

Long-Term Incentive Awards

On March 3, 2015, the Board also approved a long-term incentive plan grant (the “2015 Long-Term Incentive Grant”) for Fiscal 2015 comprised of nonqualified stock options (“Long-Term Incentive Options”), time-vesting restricted shares (“Long-Term Incentive Time Restricted shares”) and performance-vesting restricted shares (“Long-Term Incentive Performance Restricted shares”) (collectively, “Long-Term Incentive Awards”) to certain of the Company’s management and executive officers. These awards were granted pursuant to the Omnibus Incentive Plan. Subsequent grants were made in 2015, under the same terms, to newly hired employees based on their hire date and/or to certain promoted management and executive officers. As part of the Company’s annual compensation-setting process and in accordance with the Equity Grant Policy, on February 22, 2016, the Compensation Committee approved a long-term incentive plan grant (the “2016 Long-Term Incentive Grant”) for Fiscal 2016 also comprised of Long-Term Incentive Options, Long-Term Incentive Time Restricted shares and Long-Term Incentive Performance Restricted shares with similar terms as the 2015 Long-Term Incentive Grant. Pursuant to the Equity Grant Policy, the Long-Term Incentive Awards related to the 2016 Long-Term Incentive Grant will be granted effective March 1, 2016, which is the second business day following the filing of this Annual Report on Form 10-K.

Long-Term Incentive Options

The Long-Term Incentive Options vest ratably over four years from the date of grant (25% per year), subject to continued employment through the applicable vesting date and will expire 10 years from the date of grant or earlier if the employee’s service terminates. The options have an exercise price per share equal to the closing price of the Company’s common stock on the date of grant. Equity compensation expense is recognized using the straight line method for each tranche over the four year vesting period.

Long-Term Incentive Time Restricted Shares

The Long-Term Incentive Time Restricted shares vest ratably over four years from the date of grant (25% per year), subject to continued employment through the applicable vesting date. Equity compensation expense is recognized using the straight line method over the four year vesting period.

Long-Term Incentive Performance Restricted Shares

The Long-Term Incentive Performance Restricted shares vest following the end of a three-year performance period beginning on January 1, 2015 and ending on December 31, 2017 based upon the Company’s achievement of certain performance goals with respect to Adjusted EBITDA for each fiscal year performance period. The total number of shares eligible to vest is based on the level of achievement of the Adjusted EBITDA target for each fiscal year in the performance period which ranges from 0% (if below threshold performance), to 50% (for threshold performance), to 100% (for target performance), and up to 200% (at or above maximum performance). For actual performance between the specified threshold, target, and maximum levels, the resulting vesting percentage will be adjusted on a linear basis. Total shares earned (approximately 33% are eligible to be earned per year) based on the actual performance percentage for each performance year will vest on the date the Company’s Compensation Committee determines the actual performance percentage for fiscal year 2017 if the employee has not terminated prior to the last day of fiscal year 2017 and all unearned shares will forfeit immediately as of such date. The Adjusted EBITDA target for each fiscal year will be set in the first quarter of each respective year, at which time the grant date and the grant date fair value for accounting purposes related to that performance year will be established based on the closing price of the Company’s stock on such date. Equity compensation expense will be recognized ratably for each fiscal year, if the performance condition is probable of being achieved, beginning on the date of grant and through the end of the final performance period on December 31, 2017.

As of December 31, 2015, the Company had awarded 187,125 Long-Term Incentive Performance Restricted shares, net of forfeitures, under the 2015 Long-Term Incentive Plan, which represents the total shares that could be earned under the maximum performance level of achievement for all three performance periods combined, with approximately one-third related to each respective performance period. The performance goal for the first performance period was established as of the award date on March 3, 2015, as such, for accounting purposes, 62,365 of these shares have a grant date in 2015 and a grant date fair value per share determined using the closing price of the Company’s common stock on the date of grant. The performance targets for the second and third performance periods have not yet been set and will be determined by the Compensation Committee during the first quarter of each respective fiscal year, at which time, for accounting purposes, the grant date and respective grant date fair value will be determined for those related shares. As the Long-Term Incentive Performance Restricted shares have both a service and a performance condition, the requisite service period over which equity compensation expense will be recognized once the performance condition is probable of achievement begins on the date of grant and extends through December 31, 2017. Based on the Company’s Fiscal 2015 Adjusted EBITDA results for the first performance period, a percentage of the target performance level for the first performance period is considered probable; as such 18,709 Long-Term Incentive Performance Restricted shares related to the 2015 performance year are considered probable of vesting as of December 31, 2015. Total unrecognized equity compensation expense related to the first performance period expected to be recognized over the remaining vesting term was approximately $260 as of December 31, 2015. Total unrecognized equity compensation expense related to the second and third performance periods has not been determined as the grant date and grant date fair value for these awards have not yet occurred for accounting purposes, as such no expense has been recorded related to the second and third performance periods.

Other 2015 Omnibus Incentive Plan Awards

On January 15, 2015, the Company granted 100,000 time-vesting restricted shares to its Interim Chief Executive Officer (the “Interim CEO”) in accordance with his appointment to such role (see further discussion in Note 4–Restructuring Program and Separation Costs). The shares had a grant date fair value per share of $16.50 and a vest date on the earlier of the start date of a new Chief Executive Officer or June 30, 2015. As a new Chief Executive Officer was appointed with a start date of April 7, 2015, these shares fully vested on such date accordingly.

Also during the year ended December 31, 2015, the Company granted 49,284 of time-vesting restricted shares to certain Board members. These shares vest ratably over a three-year term.

Other

2.25x and 2.75x Performance Restricted Shares

The Company has outstanding under both its Omnibus Incentive Plan and its previous incentive plan (the “Pre-IPO Incentive Plan”) certain performance-vesting restricted shares (the “2.25x and 2.75x Performance Restricted shares”). The 2.25x Performance Restricted shares will vest if the employee is employed by the Company when and if certain investment funds affiliated with Blackstone receive cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of their Partnerships units equal to (x) a 20% annualized effective compounded return rate on such funds’ investment and (y) a 2.25x multiple on such funds’ investment. The 2.75x Performance Restricted shares will vest if the employee is employed by the Company when and if such funds receive cash proceeds (not subject to any clawback, indemnity or similar contractual obligation) in respect of their Partnerships units equal to (x) a 15% annualized effective compounded return rate on such funds’ investment and (y) a 2.75x multiple on such funds’ investment. Certain awards were modified to allow some employees separating from the Company to vest in their respective shares if the performance conditions are achieved after their employment ends as detailed below in Equity Plan Modifications.

No equity compensation expense will be recorded related to the 2.25x and 2.75x Performance Restricted shares until their vesting is probable. Accordingly, no equity compensation expense has been recorded during the years ended December 31, 2015, 2014 or 2013, respectively, related to these 2.25x and 2.75x Performance Restricted shares. Total unrecognized equity compensation expense as of December 31, 2015, was approximately $28,000 and $15,000 for the 2.25x and 2.75x Performance Restricted shares, respectively.

Based on cash proceeds previously received by certain investment funds affiliated with Blackstone from the Company’s initial public offering and subsequent secondary offerings of stock, the Company’s repurchase of shares and the cumulative dividends paid by the Company through January 22, 2016, if such funds receive additional future cash proceeds of approximately $960 and other vesting conditions are satisfied, the 2.25x Performance Restricted shares will vest. Similarly, if such funds receive additional future cash proceeds of approximately $428,000 and other vesting conditions are satisfied, the 2.75x Performance Restricted shares will vest. As receipt of these future cash proceeds will be primarily related to liquidity events, such as secondary offerings of stock or additional dividends paid to such funds, the shares are not considered probable of vesting until such events are consummated. On February 22, 2016, the Board declared a cash dividend of $0.21 per share to all common stockholders of record at the close of business on March 14, 2016, which will be paid on April 1, 2016. Based on this declaration, the 2.25x Performance Restricted shares will vest on April 1, 2016; therefore, the Company will recognize approximately $28,000 of equity compensation expense and record approximately $3,400 of accumulated dividends related to these shares during the first quarter of 2016.

Pre-IPO Incentive Plan and 2013 Grant

Prior to April 18, 2013, the Partnerships granted Employee Units to certain key employees of SEA (“Employee Units”) under the Pre-IPO Incentive Plan. The Employee Units which were granted were accounted for as equity awards and were divided into three tranches, Time-Vesting Units (“TVUs”), 2.25x Performance Vesting Units (“PVUs”) and 2.75x PVUs. There was no related cost to the employee upon vesting of the units. Separately, certain members of management in 2011 also purchased Class D Units of the Partnerships (“Class D Units”).

Prior to the consummation of the Company’s initial public offering, on April 18, 2013, the Employee Units and Class D Units held by certain of the Company’s directors, officers, employees and consultants were surrendered to the Partnerships and such individuals received an aggregate of 4,165,861 shares of the Company’s issued and outstanding common stock from the Partnerships. The number of shares of the Company’s common stock received by such individuals from the Partnerships was determined in a manner intended to replicate the economic value to each equity holder immediately prior to the transaction. The Class D Units and vested Employee Units were surrendered for an aggregate of 949,142 shares of common stock. The unvested Employee Units were surrendered for an aggregate of 3,216,719 unvested restricted shares of the Company’s common stock, which were subject to vesting terms substantially similar to those applicable to the unvested Employee Units immediately prior to the transaction. These unvested restricted shares consisted of time-vesting restricted share awards and 2.25x and 2.75x Performance Restricted shares which, for accounting purposes, have been removed from issued shares until their restrictions are met, as shown on the accompanying consolidated statement of changes in stockholders’ equity.

The Pre-IPO Incentive Plan TVUs originally granted vested over five years (20% per year) and vesting was contingent upon continued employment. The TVUs were originally valued at the fair market value at the date of grant and were being amortized to compensation expense over the vesting period. The unvested time-vesting restricted shares received upon surrender of the TVUs contained substantially the same terms, conditions and vesting schedules as the previously outstanding TVUs.

On April 19, 2013, 494,557 shares of restricted stock were granted to the Company’s directors, officers and employees under the Omnibus Incentive Plan (the “2013 Grant”). The shares granted were in the form of time-vesting restricted shares, 2.25x Performance Restricted shares and 2.75x Performance Restricted shares. The vesting terms and conditions of the 2013 Grant were substantially the same as those of the Pre-IPO Incentive Plan. After an initial 180 day post initial public offering lock up period, the vesting schedule from the Pre-IPO Incentive Plan carried over so that each recipient vested in the 2013 Grant in the same proportion as they were vested in the previous Pre-IPO Incentive Plan. The remaining unvested shares vest over the remaining service period, subject to substantially the same vesting conditions which carried over from the previous Pre-IPO Incentive Plan.

Equity Plan Modifications

In accordance with the guidance in ASC 718, Compensation-Stock Compensation, the surrender of the TVUs for shares of common stock and time-vesting restricted shares in 2013 qualified as a modification of an equity compensation plan. As such, the Company calculated the incremental fair value of the TVUs immediately prior to and after their modification and determined that $282 of incremental equity compensation cost would be recorded upon surrender of the vested TVUs for vested shares of stock in the year ended December 31, 2013. The remaining incremental compensation cost of $220 which represented the incremental cost on the unvested TVUs surrendered for unvested time-vesting restricted shares, was added to the original grant date fair value of the respective awards and is being amortized to compensation expense over the remaining vesting period.

The surrender of the unvested PVUs for unvested 2.25x and 2.75x Performance Restricted shares of stock in 2013 also qualified as a modification of an equity compensation plan. In addition, through December 31, 2015, conditions for eligibility on approximately 940,000 2.25x and 2.75x Performance Restricted shares have been modified to allow those participants holding such shares who were separating from the Company to vest in their respective shares if the performance conditions are achieved after their employment ends with the Company, subject to their continued compliance with applicable post-termination restrictive covenants (see Note 4–Restructuring Program and Separation Costs). As the 2.25x and 2.75x Performance Restricted shares were not considered probable of vesting before or after either modification, the Company will use the respective modification date fair value to record compensation expense related to these shares if the performance conditions become probable within a future reporting period.

Other Fair Value Assumptions

Pre-IPO Incentive Plan Fair Value Assumptions

The fair value of each Pre-IPO Incentive Plan Employee Unit originally granted prior to April 18, 2013 was estimated on the date of grant using a composite of the discounted cash flow model and the guideline public company approach to determine the underlying enterprise value. The discounted cash flow model was based upon significant inputs that are not observable in the market.

In order to calculate the incremental fair value when the unvested Employee Units were surrendered for unvested restricted shares on April 18, 2013, the Option-Pricing Method model was used to estimate the fair value prior to the modification. For the fair value after the modification, the initial public offering price of $27.00 per share was used to calculate the fair value of the time-vesting restricted shares while the fair value of the performance-vesting restricted shares was estimated using an asset-or-nothing call option approach. Significant assumptions used in both the Option-Pricing Method model and the asset-or-nothing call option approach included a holding period of approximately 2 years from the initial public offering date, a risk free rate of 0.24%, a volatility of approximately 37.6% based on re-levered historical and implied equity volatility of comparable companies and a 0% dividend yield.

2013 Grant Fair Value Assumptions

The grant date fair value of the 2013 Grant 2.25x and 2.75x Performance Restricted shares was measured using the asset-or-nothing option pricing model. Significant assumptions included a holding period of approximately 2 years from the initial public offering date, a risk free rate of 0.24%, a volatility of approximately 33.2% based on re-levered historical and implied equity volatility of comparable companies and a 0% dividend yield.

Modification Fair Value Assumptions

In order to calculate the modification date fair value for certain Performance Restricted shares which were modified, the asset-or-nothing call option approach was used. Significant assumptions included a holding period of 0.75 to 1.5 years from the date of modification, a risk free rate of 0.33% to 0.38%, a volatility of 33.0% to 45.4% based on re-levered historical and implied equity volatility of comparable companies and a 0% dividend yield.