Equity Transactions and Stock-Based Compensation Plans

Equity Transactions

In May 2012, we filed a registration statement that permits us to sell equity or debt in one or more offerings up to a total dollar amount of $300 million. As of March 31, 2014, the entire $300 million under the shelf registration statement is available for equity or debt offerings. In the future, we may consider equity or debt offerings, as appropriate, to meet our liquidity needs.

Stock-based Compensation Plans

We grant stock option and restricted stock awards with vesting based on time of service conditions. We also grant restricted stock unit awards with vesting based on time of service conditions, and in certain cases, subject to performance and market conditions. We recognize compensation cost for stock option, restricted stock and restricted stock unit awards based on the fair value estimated in accordance with ASC Topic 718, Compensation—Stock Compensation. For our awards with graded vesting, we recognize compensation expense on a straight-line basis over the service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.

The following table summarizes the compensation expense recognized for stock option, restricted stock and restricted stock unit awards during the three months ended March 31, 2014 and 2013 (amounts in thousands):



	Three months ended March 31,
	2014		2013
Stock option awards	$	343	$	526
Restricted stock awards	153		133
Restricted stock unit awards	1,360		853
	$	1,856	$	1,512

Stock Options

We grant stock option awards which generally become exercisable over a three-year period and expire ten years after the date of grant. Our stock-based compensation plans require that all stock option awards have an exercise price that is not less than the fair market value of our common stock on the date of grant. We issue shares of our common stock when vested stock option awards are exercised.

We estimate the fair value of each option grant on the date of grant using a Black-Scholes option pricing model. The following table summarizes the assumptions used in the Black-Scholes option pricing model based on a weighted-average calculation for the three months ended March 31, 2014 and 2013:



	Three months ended March 31,
	2014		2013
Expected volatility	66	%	66	%
Risk-free interest rates	1.7	%	1.0	%
Expected life in years	5.49		5.53
Options granted	221,440		220,656
Grant-date fair value	$4.87		$4.36

The assumptions used in the Black-Scholes option pricing model are based on multiple factors, including historical exercise patterns of homogeneous groups with respect to exercise and post-vesting employment termination behaviors, expected future exercising patterns for these same homogeneous groups and volatility of our stock price. As we have not declared dividends since we became a public company, we did not use a dividend yield. In each case, the actual value that will be realized, if any, will depend on the future performance of our common stock and overall stock market conditions. There is no assurance the value an optionee actually realizes will be at or near the value we have estimated using the Black-Scholes options-pricing model.

During the three months ended March 31, 2014 and 2013, 46,900 and 58,367 stock options were exercised at a weighted-average exercise price of $5.90 and $5.05, respectively. We receive a tax deduction for certain stock option exercises during the period the options are exercised, generally for the excess of the fair market value of our stock on the date of exercise over the exercise price of the options. In accordance with ASC Topic 718, we reported all excess tax benefits resulting from the exercise of stock options as financing cash flows in our condensed consolidated statement of cash flows.

Restricted Stock

Historically, we have generally granted restricted stock awards that vest over a three-year period with a fair value based on the closing price of our common stock on the date of the grant. However, beginning in 2013, we began granting restricted stock awards with a vesting period of one year. When restricted stock awards are granted, or when restricted stock unit awards are converted to restricted stock, shares of our common stock are considered issued, but subject to certain restrictions. We did not grant any restricted stock awards during the three months ended March 31, 2014 or 2013.

Restricted Stock Units

We grant restricted stock unit awards with vesting based on time of service conditions only (“time-based RSUs”), and we grant restricted stock unit awards with vesting based on time of service, which are also subject to performance and market conditions (“performance-based RSUs”). Shares of our common stock are issued to recipients of restricted stock units only when they have satisfied the applicable vesting conditions.

The following table summarizes the number and weighted-average grant-date fair value of the restricted stock unit awards granted during the three months ended March 31, 2014 and 2013:



	Three months ended March 31,
	2014		2013
Time-based RSUs:
Time-based RSUs granted	347,335		153,278
Weighted-average grant-date fair value	$	8.44	$	7.66

Performance-based RSUs:
Performance-based RSUs granted	321,606		50,858
Weighted-average grant-date fair value	$	9.90	$	8.34

Our time-based RSUs generally vest over a three-year period, with fair values based on the closing price of our common stock on the date of grant.

Our performance-based RSUs generally cliff vest after 39 months from the date of grant and are granted at a target number of issuable shares, for which the final number of shares of common stock is adjusted based on our actual achievement levels that are measured against predetermined performance conditions. The number of shares of common stock awarded will be based upon the Company’s achievement in certain performance conditions, as compared to a predefined peer group, over the performance period, generally three years.

Approximately one-third of the performance-based RSUs granted during 2011, 2012 and 2013, and half of the performance-based RSUs granted during 2014, are subject to a market condition based on total shareholder return, and therefore the fair value of these awards is measured using a Monte Carlo simulation model. Compensation expense for awards with a market condition is reduced only for estimated forfeitures; no adjustment to expense is otherwise made, regardless of the number of shares issued, if any. The remaining performance-based RSUs are subject to performance conditions, based on EBITDA and return on capital employed, and therefore the fair value is based on the closing price of our common stock on the date of grant, applied to the estimated number of shares that will be awarded. Compensation expense ultimately recognized for awards with performance conditions will be equal to the fair value of the restricted stock unit award based on the actual outcome of the service and performance conditions.

In April 2014, we determined that 116.6% of the target number of shares granted during 2011 were actually earned based on the Company’s achievement of certain performance measures, as compared to the predefined peer group, over the performance period from January 1, 2011 through December 31, 2013. The performance-based RSUs granted during 2011 will vest and convert to common stock at the end of April 2014.

As of March 31, 2014, we estimated that our actual achievement level for the performance-based RSUs granted during 2012, 2013 and 2014 will be approximately 110%, 100% and 100% of the predetermined performance conditions, respectively.