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 and the closing stock price on the date of grant to value its time-vesting restricted share awards and its performance-vesting restricted share awards granted in 2016 and 2015.

Total equity compensation expense was $37,515, $6,527 and $2,349 for the years ended December 31, 2016, 2015 and 2014, respectively. Total equity compensation expense for the year ended December 31, 2016 includes $27,516 related to certain of the Company’s performance-vesting restricted shares (the “2.25x Performance Restricted shares”) which vested on April 1, 2016. See the “2.25x and 2.75x Performance Restricted Shares” section which follows for further details. Equity compensation is included in selling, general and administrative expenses and in operating expenses in the accompanying consolidated statements of comprehensive (loss) income. Total unrecognized equity compensation expense for all equity compensation awards probable of vesting as of December 31, 2016 was approximately $27,960 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, 2016, 2015 and 2014 was approximately $32,164, $2,450 and $2,410, respectively. Total fair value of shares which vested during the year ended December 31, 2016 includes $27,516 related to the 2.25x Performance Restricted shares which vested on April 1, 2016. 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, 2016, 2015 and 2014 were $17.20, $18.76 and $24.59 per share, respectively.

The activity related to the Company’s time-vesting and performance-vesting restricted share awards during the year ended December 31, 2016 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, 2015		883,270		$	18.66		415,995		$	19.00		62,365		$	18.88		1,370,821		$	20.35		1,370,821		$	10.93
Granted		769,906		$	16.41		502,576		$	17.89		200,098		$	18.50		—			—		—			—
Vested		(254,708	)	$	18.25		—			—		—			—		(1,370,821	)	$	20.07		—			—
Forfeited		(75,443	)	$	18.02		(467,282	)	$	18.88		(50,094	)	$	19.28		—		$	—		(60,095	)	$	15.42
Outstanding at December 31, 2016		1,323,025		$	17.47		451,289		$	17.88		212,369		$	18.43		—		$	—		1,310,726		$	8.19

The activity related to the Company’s stock option awards during the year ended December 31, 2016 is as follows:

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding at December 31, 2015		2,274,385		$	19.21
Granted		1,472,937		$	17.83
Forfeited		(266,307	)	$	18.60
Expired		(34,784	)	$	18.96
Exercised		(4,331	)	$	18.96
Outstanding at December 31, 2016		3,441,900		$	18.67		8.67	$	2,091
Exercisable at December 31, 2016		523,125		$	19.23		8.32	$	140

The weighted average grant date fair value of stock options granted during the year ended December 31, 2016 was $3.69 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, 2016 were:

Risk- free interest rate	1.47	%
Expected volatility^(a)	35.46	%
Expected dividend yield	4.69	%
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, 2016, the Company withheld an aggregate of 89,180 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, 2016, there were 8,642,630 shares of common stock available for future issuance under the Company’s Omnibus Incentive Plan.

Bonus Performance Restricted Shares

The Company has annual bonus plans (the “2016 Bonus Plan” and the “2015 Bonus Plan”) for the fiscal years ended December 31, 2016 and 2015, respectively (the “Fiscal 2016” and “Fiscal 2015”), under which certain employees are eligible to receive a bonus with respect to Fiscal 2016 and 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 for the respective performance year. The Bonus Performance Restricted shares were granted in 2016 and 2015 pursuant to the Omnibus Incentive Plan.

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 2016 and 2015 Adjusted EBITDA results, the Bonus Performance Restricted shares were not considered probable of vesting as of December 31, 2016 and 2015; therefore, no equity compensation expense has been recorded related to these shares. The shares related to the 2016 Bonus Plan will forfeit in the first quarter of 2017 and the shares related to the 2015 Bonus Plan forfeited in the first quarter of 2016.

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 December 7, 2016, the Compensation Committee approved an annual bonus plan (the “2017 Bonus Plan”) for the fiscal year ending December 31, 2017 (the “Fiscal 2017”). The 2017 Bonus Plan provides for 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 2017 Adjusted EBITDA (weighted at 50%), Total Revenue (weighted at 30%) and Adjusted EBITDA Margin (weighted at 20%). Pursuant to the Equity Grant Policy, the Bonus Performance Restricted shares related to the 2017 Bonus Plan will be granted effective as of March 3, 2017, which is the second business day following the filing of the Annual Report on Form 10-K.

Long-Term Incentive Awards

The Board has also approved long-term incentive plan grants (the “2016 Long-Term Incentive Grant” and “the 2015 Long-Term Incentive Grant”) for Fiscal 2016 and 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 in 2016 and 2015.

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 Long-Term Incentive 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 of the fiscal year in which the award was granted and ending on December 31 of the third fiscal year 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 is 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 the third fiscal year (“Determination Date”) in the performance period if the employee has not terminated prior to the last day of such fiscal year. Additionally, all unearned shares will forfeit immediately as of the Determination Date. The Adjusted EBITDA target for each fiscal year is 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 is established based on the closing price of the Company’s stock on such date plus any accumulated dividends earned since the date of the initial award. Equity compensation expense is recognized ratably for each fiscal year, if the performance condition is probable of being achieved, beginning on the date of grant and through December 31 of the third fiscal year in the performance period.

As of December 31, 2016, the Company had awarded 385,153 Long-Term Incentive Performance Restricted shares, net of forfeitures, under the 2016 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 (Fiscal 2016, Fiscal 2017 and Fiscal 2018). For accounting purposes, the performance goals for the respective performance periods must be established for a grant date to be determined. As such, since the performance goal for Fiscal 2016 was established as of the award date, for accounting purposes, 128,369, net of forfeitures, of the Long-Term Incentive Performance Restricted shares under the 2016 Long-Term Incentive Plan have a grant date in 2016 and grant-date fair value determined using the closing price of the Company’s common stock on the date of grant. The performance targets for the subsequent performance periods, Fiscal 2017 and Fiscal 2018, 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 of December 31, 2016, the Company had awarded 126,024 Long-Term Incentive Performance Restricted shares, net of forfeitures, under its 2015 Long-Term Incentive Plan which represented the total shares that could be earned under the maximum performance level of achievement for all three performance periods combined under the 2015 Long-Term Incentive Plan (Fiscal 2015, Fiscal 2016 and Fiscal 2017). Of these Long-Term Incentive Performance Restricted Shares, 42,000, net of forfeitures, relate to the Fiscal 2015 performance period and were considered granted for accounting purposes in 2015. As the Fiscal 2016 performance target was established during the first quarter of 2016, 42,000 Long-Term Incentive Performance Restricted shares, net of forfeitures, were considered granted for accounting purposes during the year ended December 31, 2016 and the grant-date fair value was determined using the close price on the date the performance target was established plus accumulated dividends earned since the date of the initial award.

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 is recognized once the performance condition is probable of achievement begins on the date of grant and extends through December 31 of the third fiscal year in the respective performance period (Fiscal 2017 under the 2015 Long-Term Incentive Plan and Fiscal 2018 under the 2016 Long-Term Incentive Plan). Based on the Company’s progress toward the Adjusted EBITDA performance goal for Fiscal 2016, the target performance level for Fiscal 2016 is not considered probable; as such all 170,369 Long-Term Incentive Performance Restricted shares granted in Fiscal 2016, net of forfeitures, under both the 2015 and the 2016 Long-Term Incentive Plan are not considered probable of vesting as of December 31, 2016. Total unrecognized equity compensation expense related to the Fiscal 2015 performance period expected to be recognized over the remaining vesting term was approximately $91 as of December 31, 2016. Unrecognized equity compensation expense related to the maximum performance level for the Fiscal 2016 performance period on shares not probable of vesting is $3,081 as of December 31, 2016. Total unrecognized equity compensation expense related to the subsequent performance periods have 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 subsequent performance periods.

As part of the Company’s annual compensation-setting process and in accordance with the Equity Grant Policy, on December 7, 2016, the Compensation Committee approved a long-term incentive plan grant (the “2017 Long-Term Incentive Grant”) for Fiscal 2017 comprised of Long-Term Incentive Time Restricted shares and Long-Term Incentive Performance Restricted shares to certain employees. The 2017 Long-Term Incentive Grant will no longer include Long-Term Incentive Options. The Long-Term Incentive Time Restricted shares are expected to vest over five years, with one-third vesting on each of the third, fourth and fifth anniversaries of the date of grant. The Long-Term Incentive Performance Restricted shares are expected to vest following the end of the three-year performance period beginning on January 1, 2017 and ending on December 31, 2019 based upon the Company’s achievement of pre-established performance goals with respect to Adjusted EBITDA (weighted at 50%), Total Revenue (weighted at 30%) and Return on Invested Capital (weighted at 20%) for the three year performance period, as defined by the 2017 Long Term Incentive Grant. Pursuant to the Equity Grant Policy, the Long-Term Incentive Awards related to the 2017 Long-Term Incentive Grant will be granted effective March 3, 2017, which is the second business day following the filing of the Annual Report on Form 10-K.

Other 2016 Omnibus Incentive Plan Awards

In accordance with the Company’s Second Amended and Restated Outside Director Compensation Policy, on June 15, 2016, 53,333 time-vesting restricted shares were granted to the non-employee directors of the Company’s Board of which 7,619 of these shares represented the grant of an initial award, which vests ratably over three years from the date of grant, subject to the outside director’s continued service on the Board through such vesting date and 45,714 of these shares vest 100% on the day before the 2017 Annual Stockholders Meeting, subject to the outside directors’ continued service on the Board through such vesting date.

Other

Other Fair Value Assumptions

The Company has outstanding under both its Omnibus Incentive Plan and its previous incentive plan (the “Pre-IPO Incentive Plan”) certain time-vesting restricted shares (the “TVUs”) and performance-vesting restricted shares (the “2.75x Performance Restricted shares”). 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 fair value of each Pre-IPO Incentive Plan 2.75x Performance Restricted shares originally granted 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. After the IPO on April 8, 2013, the modification fair value was calculated using the asset-or-nothing call approach. Significant assumptions used 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. The grant date fair value of the Omnibus Incentive Plan 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.

Equity Plan Modifications

Through the year ended December 31, 2016, conditions for eligibility on a total of 702,735 2.75x Performance Restricted shares were 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. As the 2.75x Performance Restricted shares were not considered probable of vesting at the time of the modifications, the Company used the respective modification date fair value to calculate any related equity compensation expense.

2.25x and 2.75x Performance Restricted Shares

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 repurchases of shares and the cumulative dividends paid by the Company through April 1, 2016, the vesting conditions on the Company’s previously outstanding 2.25x Performance Restricted shares were satisfied with the Company’s dividend payment to such investment funds affiliated with Blackstone on April 1, 2016. Accordingly, during the three months ended March 31, 2016, upon declaration of the dividend, the 2.25x Performance Restricted shares were considered probable of vesting and all of the related equity compensation expense and accumulated dividends were recognized in the accompanying consolidated financial statements. On April 1, 2016, upon payment of the dividend to such investment funds affiliated with Blackstone, all previously outstanding 1,370,821 2.25x Performance Restricted shares vested and the related accumulated dividends of $3,400 were paid.

The 2.75x Performance Restricted shares remain outstanding and will vest if the employee is employed by the Company when and if such 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 15% annualized effective compounded return rate on such funds’ investment and (y) a 2.75x multiple on such funds’ investment. As receipt of these future cash proceeds will be primarily related to a liquidity event, such as secondary offerings of stock or additional dividends paid to such funds, the 2.75x Performance Restricted shares are not considered probable of vesting until such events are consummated. The additional future cash proceeds necessary to trigger the vesting of the 2.75x Performance Restricted shares under the terms of the original award is approximately $421,000. Total unrecognized equity compensation expense as of December 31, 2016, was approximately $11,000 for the 2.75x Performance Restricted shares. No equity compensation expense has been recorded during the years ended December 31, 2016, 2015 and 2014 related to the 2.75x Performance Restricted shares as their vesting has not been considered probable. The Company will recognize equity compensation expense related to any outstanding 2.75x Performance Restricted shares upon such funds’ receipt of final cash proceeds in the event of a full liquidation by such funds regardless of whether or not the shares vest in accordance to their terms.