4. Stock-based Compensation

The Company’s stock-based compensation plans consist of its 2006 Long-Term Incentives Plan (the “2006 LTIP”) and its 2004 Stock Option Plan. As of March 31, 2014, there were 3,354,970 shares available for grant under the 2006 LTIP and no shares available for grant under the 2004 Stock Option Plan.

For the three months ended March 31, 2014 and 2013 the Company recorded stock-based compensation expense of $881 and $626, respectively. For the three months ended March 31, 2014 and 2013, the Company capitalized stock-based compensation of $61 and $25, respectively.

The following table summarizes the components of stock-based compensation expense in the condensed consolidated statements of operations for the three months ended March 31, 2014 and 2013:


	Three months ended March 31,
	2014		2013
Cost of services	$	69	$	67
Cost of product sales		30		23
Selling, general and administrative		722		496
Product development		60		40

Total	$	881	$	626

As of March 31, 2014, the Company had unrecognized compensation costs for stock appreciation rights and restricted stock unit arrangements totaling $2,837.

Time-Based Stock Appreciation Rights

A summary of the Company’s time-based SARs for the three months ended March 31, 2014 is as follows:


						Weighted-Average
						Remaining		Aggregate
	Number of			Weighted-Average		Contractual		Intrinsic Value
	Shares			Exercise Price		Term (years)		(In thousands)
Outstanding at January 1, 2014		3,611,567		$	4.20
Granted		54,000			7.62
Exercised		(10,700	)		2.31
Forfeited or expired		(39,800	)		5.05

Outstanding at March 31, 2014		3,615,067		$	4.25		6.71	$	9,674

Exercisable at March 31, 2014		2,767,700		$	3.95		5.93	$	8,316

Vested and expected to vest at March 31, 2014		3,615,067		$	4.25		6.71	$	9,674

For the three months ended March 31, 2014 and 2013, the Company recorded stock-based compensation expense of $414 and $317 relating to these SARs, respectively. As of March 31, 2014, $1,980 of total unrecognized compensation cost related to these SARs is expected to be recognized through March 2017.

The weighted-average grant date fair value of the time-based SARs granted during the three months ended March 31, 2014 was $4.66.

The intrinsic value of the SARs exercised was $53 for the three months ended March 31, 2014.

Performance-Based Stock Appreciation Rights

A summary of the Company’s performance-based SARs for the three months ended March 31, 2014 is as follows:


						Remaining		Aggregate
	Number of			Weighted-Average		Contractual		Intrinsic Value
	Shares			Exercise Price		Term (years)		(In thousands)
Outstanding at January 1, 2014		865,713		$	5.37
Granted		—			—
Exercised		(39,362	)		3.55
Forfeited or expired		(13,600	)		6.33

Outstanding at March 31, 2014		812,751		$	5.44		6.16	$	2,101

Exercisable at March 31, 2014		812,751		$	5.44		6.16	$	2,101

Vested and expected to vest at March 31, 2014		812,751		$	5.44		6.16	$	2,101

For the three months ended March 31, 2014 and 2013, the Company recorded stock-based compensation of $47 and $99 relating to these SARs, respectively. As of March 31, 2014, the Company had unrecognized compensation cost of nil related to these SARs.

The intrinsic value of the SARs exercised was $134 for the three months ended March 31, 2014.

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 is based 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.


	Three months ended March 31,
	2014	2013
Risk-free interest rate	1.81% and 1.94%	1.00% to 1.41%
Expected life (years)	6.0	5.50 and 6.0
Estimated volatility factor	67.05% and 67.34%	73.74% to 74.67%
Expected dividends	None	None

Time-based Restricted Stock Units

A summary of the Company’s time-based RSUs for the three months ended March 31, 2014 is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2014		85,270		$	3.32
Granted		90,255			7.04
Vested		(65,270	)		3.83
Forfeited or expired		—			—

Balance at March 31, 2014		110,255		$	6.06

For the three months ended March 31, 2014 and 2013, the Company recorded stock-based compensation expense of $90 and $69 related to these RSUs, respectively. As of March 31, 2014, $610 of total unrecognized compensation cost related to these RSUs is expected to be recognized through March 2015.

Performance-based Restricted Stock Units

A summary of the Company’s performance- based RSUs for the three months ended March 31, 2014 is as follows:


	Shares			Weighted-Average Grant Date Fair Value
Balance at January 1, 2014		313,000		$	4.26
Granted		—			—
Vested		(200,938	)		3.87
Forfeited or expired		(57,062	)		4.04

Balance at March 31, 2014		55,000		$	5.92

For the three months ended March 31, 2014 and 2013, the Company recorded stock-based compensation expense of $226 and $340 related to these RSUs, respectively. As of March 31, 2014, $247 of total unrecognized compensation cost related to these RSUs is expected to be recognized through March 2015.

The fair values 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

The Company grants 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. 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 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 using a Monte Carlo Simulation Model that used the following assumptions:


	Three months ended March 31,
	2014	2013
Risk-free interest rate	0.09% to 0.79%	0.13% to 0.35%
Estimated volatility factor	40.00% to 45.00%	40.00%
Expected dividends	None	None

For the three months ended March 31, 2014 and 2013, the Company recorded stock-based compensation relating to these MPUs of $105 and $51, respectively.

2004 Stock Option Plan

A summary of the status of the Company’s stock options as of March 31, 2014 is as follows:


						Weighted-Average
						Remaining		Aggregate
	Number of			Weighted-Average		Contractual		Intrinsic Value
	Shares			Exercise Price		Term (years)		(In thousands)
Outstanding at January 1, 2014		88,446		$	4.04
Granted		—			—
Exercised		(20,792	)		2.98
Forfeited or expired		(17,654	)		2.91

Outstanding at March 31, 2014		50,000		$	4.88		1.09	$	99

Exercisable at March 31, 2014		50,000		$	4.88		1.09	$	99

Vested at March 31, 2014		50,000		$	4.88		1.09	$	99

The intrinsic value of the stock options exercised was $80 for the three months ended March 31, 2014.