Note 5. Stock-based Compensation

The Company’s share-based compensation plans consist of its 2006 Long-Term Incentives Plan (the “2006 LTIP”) and its 2004 Stock Option Plan. As of December 31, 2013, there were 3,338,701 shares available for grant under the 2006 LTIP.

For the years ended December 31, 2013, 2012 and 2011, the Company recognized stock-based compensation expense of $2,973, $1,801 and $1,914, respectively. For the years ended December 31, 2013, 2012 and 2011, the Company capitalized stock-based compensation of $130, $80 and $57 to satellite network and other equipment, respectively. The Company has not recognized and currently does not expect to recognize in the foreseeable future, any tax benefit related to stock-based compensation as a result of the full valuation allowance on its net deferred tax assets and its net operating loss carryforwards generated in the U.S.

The components of the Company’s stock-based compensation expense are presented below:


	For the Years Ended December 31,
	2013		2012		2011
Stock appreciation rights	$	1,659	$	1,475	$	1,488
Restricted stock units		990		326		426
Market performance units		324		—		—

Total	$	2,973	$	1,801	$	1,914

As of December 31, 2013, the Company had unrecognized compensation costs for all share-based payment arrangements totaling $2,910.

2006 LTIP

The 2006 LTIP provides for grants and awards of stock options, stock appreciation rights (“SARs”), common stock, restricted stock, restricted stock units (“RSUs”), performance units and performance shares to directors and employees. The maximum number of shares available for grant is 9,714,827. Stock options granted pursuant to the 2006 LTIP Plan have a maximum term of 10 years. The SARs expire 10 years from the date of grant and are payable in cash, shares of common stock or a combination of both upon exercise, as determined by the Compensation Committee. The 2006 LTIP is administrated by the Compensation Committee of the Company’s Board of Directors, which selects persons eligible to receive awards under the 2006 LTIP and determines the number, terms, conditions, performance measures and other provisions of the awards.

Time-Based Stock Appreciation Rights

In 2013, the Company granted 755,500 time-based SARs, which vest through June 2016.

A summary of the Company’s time-based SARs for the year ended December 31, 2013 is as follows:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2013		3,422,967		$	3.72
Granted		755,500			5.35
Exercised		(418,900	)		2.59
Forfeited or expired		(148,000	)		3.43

Outstanding at December 31, 2013		3,611,567		$	4.20		6.93	$	7,987

Exercisable at December 31, 2013		2,744,400		$	3.92		6.11	$	6,941

Vested and expected to vest at December 31, 2013		3,611,567		$	4.20		6.93	$	7,987

For the years ended December 31, 2013, 2012 and 2011, the Company recorded stock-based compensation expense of $1,412, $993 and $1,059 relating to these SARs, respectively. As of December 31, 2013, $2,326 of total unrecognized compensation cost relating to these SARs is expected to be recognized through June 2016.

The weighted-average grant date fair value of the SARs granted in 2013, 2012 and 2011 was $3.31, $2.23 and $1.68 per share, respectively.

For the year ended December 31, 2013, the intrinsic value of the SARs exercised was $1,001.

Performance-Based Stock Appreciation Rights

In 2013, the Company granted 120,500 performance-based SARs for 2013 financial and operational targets, which are expected to vest in the first quarter of 2014. As of December 31, 2013, the Company estimates that 77,200 of these SARs will vest in the first quarter of 2014.

A summary of the Company’s performance-based SARs for the year ended December 31, 2013 is as follows:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2013		1,034,025		$	4.88
Granted		120,500			4.20
Exercised		(151,375	)		2.90
Forfeited or expired		(137,437	)		3.39

Outstanding at December 31, 2013		865,713		$	5.37		6.47	$	1,918

Exercisable at December 31, 2013		836,413		$	5.41		6.37	$	1,856

Vested and expected to vest at December 31, 2013		836,413		$	5.41		6.37	$	1,856

For the years ended December 31, 2013, 2012 and 2011, the Company recorded stock-based compensation expense of $247, $482 and $429 relating to these SARs, respectively. As of December 31, 2013, $47 of total unrecognized compensation cost related to these SARs is expected to be recognized through the first quarter of 2014.

The weighted-average grant date fair value of the SARs granted during the years ended December 31, 2013, 2012 and 2011 was $2.52, $2.06 and $2.00 per share, respectively.

For the year ended December 31, 2013, the intrinsic value of the SARs exercised was $290.

The fair value of each time and performance SAR award is estimated on the date of grant using the Black-Scholes option pricing model with the assumptions described below for the periods indicated. Depending how long the Company’s common stock has been publicly traded at the grant date the expected volatility was based either on (i) an average of the Company’s historical volatility over the expected terms of the SAR awards and the comparable publicly traded companies historical volatility or (ii) the Company’s historical volatility over the expected terms of SAR awards. Estimated forfeitures were based on voluntary and involuntary termination behavior as well as analysis of actual forfeitures. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR grants.


	Years ended December 31,
	2013	2012	2011
Risk-free interest rate	.91% to 2.11%	.11% to 1.41%	1.00% to 2.65%
Expected life (years)	5.5 and 6.0	5.5 and 6.0	5.5 and 6.0
Estimated volatility factor	67.56% to 69.92%	71.18% to 74.34%	64.15% to 74.34%
Expected dividends	None	None	None

Time-Based Restricted Stock Units

In 2013, the Company granted 80,270 time-based RSUs, which vest through January 2014.

A summary of the Company’s time-based RSUs for the year ended December 31, 2013 is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2013		88,821		$	3.12
Granted		80,270			4.00
Vested		(83,821	)		3.76
Forfeited or expired		—			—

Balance at December 31, 2013		85,270		$	3.32

For the years ended December 31, 2013, 2012 and 2011, the Company recorded stock-based compensation expense of $357, $326 and $426 related to these RSUs, respectively. As of December 31, 2013, $65 of total unrecognized compensation cost related to these RSUs is expected to be recognized through December 2015.

Performance-based Restricted Stock Units

During the year ended December 31, 2013, the Company granted 258,000 performance-based RSUs for 2013 financial and operational targets which are expected to vest in the first quarter of 2014. As of December 31, 2013, the Company estimates that 201,538 of these RSUs will vest in the first quarter of 2014. In addition, during the three months ended December 31, 2013, the Company granted 55,000 performance-based RSUs for 2014 financial and operational targets which are expected to vest in the first quarter of 2015. As of December 31, 2013, the Company estimates that 100% of these RSUs will vest in the first quarter of 2015.

A summary of the Company’s performance-based RSUs for the year ended December 31, 2013 is as follows:


	Shares		Weighted-Average Grant Date Fair Value
Balance at January 1, 2013		—	$	—
Granted		313,000		4.26
Vested		—		—
Forfeited or expired		—		—

Balance at December 31, 2013		313,000	$	4.26

For the year ended December 31, 2013, the Company recorded stock-based compensation expense of $633 related to these RSUs. As of December 31, 2013, the Company has $472 of total unrecognized compensation cost related to these RSUs of which $160 is expected to be recognized through the first quarter of 2014 and $312 is expected to be recognized through the first quarter of 2015.

The fair value of the time-based and performance-based RSU awards are based upon the closing stock price of the Company’s common stock on the date of grant.

Performance Units

In December 2013 and 2012, the Company granted Market Performance Units (“MPUs”) to its senior executives based on stock price performance over a three-year period measured on December 31 for each performance period. For MPUs granted in December 2012, the performance period covers fiscal years 2013, 2014 and 2015. For MPUs granted in December 2013, the performance period covers fiscal years 2014, 2015 and 2016. The MPUs will vest at the end of each performance period only if the Company satisfies the stock price performance targets and continued employment by the senior executives through the dates the Compensation Committee has determined that the targets have been achieved. The value of the MPUs that will be earned each year ranges up to 15% of each of the senior executives’ 2013 base salaries depending on the Company’s stock price performance target for that year. The value of the MPUs can be paid in either cash or common stock or a combination at the Company’s option. The MPUs are classified as a liability and are revalued at the end of reporting period based on the awards fair value over a three-year period.

As of December 31, 2013, the Compensation committee determined that the stock price performance target was achieved for fiscal year 2013. In January 2014, the Company issued 33,594 shares of its common stock as form of payment for achieving the fiscal year 2013 stock performance target.

As the MPUs contain both a performance and service condition, the MPUs have been treated as a series of three separate awards or tranches for purposes of recognizing stock-based compensation expense. The Company recognizes stock-based compensation expense on a tranche-by-tranche basis over the requisite service period for that specific tranche. The Company estimated the fair value of the MPUs granted using a Monte Carlo Simulation Model that used the following assumptions: risk-free interest rates of ranging from 0.13% to 0.78%, estimated volatility factor of 40% and no expected dividends. For the year ended December 31, 2013, the Company recorded stock-based compensation relating to these MPUs of $324. As of December 31, 2012, the value of the MPUs was insignificant.

Stock Options

Options granted under the 2004 Stock Option Plan have a maximum term of 10 years and vest over a period determined by the Company’s Board of Directors (generally four years) at an exercise price per share determined by the Board of Directors at the time of the grant. The 2004 stock option plan expires 10 years from the effective date, or when all options have been granted, whichever is sooner. The Company did not grant stock options in 2013, 2012 and 2011.

A summary of the status of the Company’s stock options as of December 31, 2013 is as follows:


	Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)		Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2013		737,291		$	2.96
Granted		—			—
Exercised		(648,845	)		2.81
Forfeited or expired		—			—

Outstanding at December 31, 2013		88,446		$	4.04		0.81	$	203

Exercisable at December 31, 2013		88,446		$	4.04		0.81	$	203

Vested and expected to vest at December 31, 2013		88,446		$	4.04		0.81	$	203

For the year ended December 31, 2013, the intrinsic value of the stock options exercised was $1,629.