NOTE 10. Stock-Based Compensation

To date, the Company has issued equity awards that consist of stock options, restricted stock, restricted stock awards and restricted stock units. Non-cash compensation expense for the equity awards is calculated based on the fair value of the award on the date of grant and amortized on a straight-line basis over the vesting period. For restricted stock awards and restricted stock units where vesting is contingent upon meeting both a service condition and a performance condition, the Company recognizes expense on the estimated number of shares that is anticipated to vest over the requisite service period. Changes to the number of shares that are anticipated to vest will result in a cumulative catch-up or a reduction of expense in the period in which the change in estimate is made.

In connection with the acquisition of GeoEye, the Company issued equity awards to replace the outstanding GeoEye options, restricted stock awards and restricted stock unit awards with options, restricted stock awards and restricted stock unit awards, respectively, for the Company’s common stock.

Stock Options

The Company did not award stock options during the nine months ended September 30, 2013 other than in connection with the GeoEye acquisition.

A summary of stock option activity for the nine months ended September 30, 2013 is presented below:

(in millions, except for weighted average exercise prices)	Number of Shares		Weighted-Average Exercise Price
Outstanding — December 31, 2012	3.7		$	21.06
Granted in GeoEye acquisition (Note 4)	1.4		17.69
Exercised	(2.1	)	19.39
Forfeited/Expired	(0.2	)	24.02
Outstanding — September 30, 2013	2.8		20.31
Exercisable — September 30, 2013	1.7		$	22.22

Restricted Stock Awards

During the nine months ended September 30, 2013, the Company did not grant any restricted stock awards other than in connection with the GeoEye acquisition. A summary of restricted stock activity for the nine months ended September 30, 2013 is shown below:

(in millions, except for weighted average grant date fair values)	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2012	0.6		$	17.52
Granted in GeoEye acquisition (Note 4)	0.5		27.97
Forfeited/Canceled	(0.1	)	24.00
Vested	(0.5	)	24.79
Non-vested at September 30, 2013	0.5		$	19.13

Restricted Stock Units

During the nine months ended September 30, 2013, the Company awarded 0.8 million restricted stock units. A summary of restricted stock unit activity for the nine months ended September 30, 2013 is shown below:

(in millions, except for weighted average grant date fair values)	Number of Shares		Weighted- Average Grant Date Fair Value
Non-vested at December 31, 2012	0.1		$	32.92
Granted	0.8		30.72
Granted in GeoEye acquisition (Note 4)	0.3		27.97
Forfeited/Canceled	—		—
Vested	(0.4	)	28.04
Non-vested at September 30, 2013	0.8		$	28.11

Of the non-vested restricted stock units outstanding at September 30, 2013, approximately 0.2 million shares are performance share units where vesting is contingent upon meeting both a service requirement and either a Company financial performance condition or a Company stock market performance condition. The number of shares granted with the financial performance condition that ultimately will vest are based on a measurement of the Company’s average annual return on invested capital as determined over the three year vesting period of the awards. The number of shares granted with the Company stock market condition that ultimately will vest are based on a measurement of the change in the Company’s average stock price compared to the change in value in the Russell 2000 stock index as determined over the three year vesting period of the awards. The awards granted with a stock market performance condition were valued at the grant date at $47.32 per share using a Monte Carlo simulation. For both types of awards, the number of shares that ultimately vest could range from 50% to 200% of the target amount, or zero percent if the minimum threshold is not achieved. During the second quarter of 2013, as a result of the acquisition of GeoEye, management projected that the Company’s average return on invested capital would decrease below the minimum threshold necessary for vesting in the financial performance based awards, which did not contemplate the acquisition of GeoEye when the awards were granted. As a result, in the second quarter of 2013, approximately $0.4 million of cumulative compensation expense previously recognized for these awards through March 31, 2013 was reversed. In July 2013, in accordance with the terms of the financial performance based awards, the Company’s compensation committee modified the targets for the vesting of these awards to align the awards in a manner consistent with their contemplated financial objectives prior to the acquisition. The modification to the awards resulted in the awards being re-valued as of the date of the modification at $32.92 per share. The target number of awards expected to vest under the modified financial performance condition would result in non-cash compensation expense of approximately $3.3 million, which is being recognized beginning in the third quarter of 2013 and will continue over the remaining term of the awards until the second quarter of 2015. Changes to the number of shares expected to vest granted with a financial performance condition will result in a cumulative catch up or reduction of expense in the period in which the change in estimate is made.

Treasury Stock

During the three and nine month periods ended September 30, 2013 and 2012, certain participants elected to have the Company withhold shares to satisfy the minimum tax withholding obligations due at the time their restricted stock vested. The quantity and value of the shares withheld were immaterial and have been included in treasury shares. The Company made no open market repurchases of its common stock during the three or nine month periods ended September 30, 2013 or 2012.