EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2011

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

NOTE 7—EARNINGS PER SHARE AND STOCK-BASED COMPENSATION

The following table sets forth the computation of Basic and Diluted earnings per share:

	Three Months Ended June 30,

	2011						2010
	Basic			Diluted			Basic			Diluted
	(In thousands, except per share data)
Numerator:
Loss from continuing operations	$	(8,475	)	$	(8,475	)	$	(6,878	)	$	(6,878	)
Income (loss) from discontinued operations, net of tax		(9,343	)		(9,343	)		6,079			6,079

Net loss available to common shareholders	$	(17,818	)	$	(17,818	)	$	(799	)	$	(799	)

Denominator:
Weighted average common shares		11,014			11,014			11,240			11,240

Loss per Share:
Loss from continuing operations	$	(0.77	)	$	(0.77	)	$	(0.61	)	$	(0.61	)
Income (loss) from discontinued operations, net of tax		(0.85	)		(0.85	)		0.54			0.54

Net loss per common share	$	(1.62	)	$	(1.62	)	$	(0.07	)	$	(0.07	)

	Six Months Ended June 30,

	2011						2010
	Basic			Diluted			Basic			Diluted
	(In thousands, except per share data)
Numerator:
Loss from continuing operations	$	(30,007	)	$	(30,007	)	$	(16,856	)	$	(16,856	)
Income (loss) from discontinued operations, net of tax		(27,306	)		(27,306	)		9,911			9,911

Net loss available to common shareholders	$	(57,313	)	$	(57,313	)	$	(6,945	)	$	(6,945	)

Denominator:
Weighted average common shares		10,948			10,948			11,039			11,039

Loss per Share:
Loss from continuing operations	$	(2.74	)	$	(2.74	)	$	(1.53	)	$	(1.53	)
Income (loss) from discontinued operations, net of tax		(2.49	)		(2.49	)		0.90			0.90

Net loss per common share	$	(5.23	)	$	(5.23	)	$	(0.63	)	$	(0.63	)

Non-cash compensation expense related to equity awards is included in the following line items in the accompanying consolidated statements of operations for the three and six months ended June 30, 2011 and 2010 (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,

	2011		2010		2011		2010
Cost of revenue	$	1	$	1	$	3	$	16
Selling and marketing expense		105		41		265		109
General and administrative expense		624		813		1,514		1,640
Product development		58		38		154		92

Non-cash compensation expense	$	788	$	893	$	1,936	$	1,857

The forms of stock-based awards granted to Tree.com employees are principally restricted stock units ("RSUs"), restricted stock and stock options. RSUs are awards in the form of units, denominated in a hypothetical equivalent number of shares of Tree.com common stock and with the value of each award equal to the fair value of Tree.com common stock at the date of grant. RSUs may be settled in cash, stock or both, as determined by the Compensation Committee at the time of grant. Each stock-based award is subject to service-based vesting, where a specific period of continued employment must pass before an award vests. Certain restricted stock awards also include performance-based vesting, where certain performance targets set at the time of grant must be achieved before an award vests. Tree.com recognizes expense for all stock-based awards for which vesting is considered probable. For stock-based awards, the accounting charge is measured at the grant date as the fair value of Tree.com common stock and expensed ratably as non-cash compensation over the vesting term. For performance-based awards, the expense is measured at the grant date as the fair value of Tree.com common stock and expensed as non-cash compensation over the vesting period if the performance targets are considered probable of being achieved.

The amount of stock-based compensation expense recognized in the consolidated statement of operations is reduced by estimated forfeitures, as the amount recorded is based on awards ultimately expected to vest. The forfeiture rate is estimated at the grant date based on historical experience and revised, if necessary, in subsequent periods if the actual forfeiture rate differs from the estimated rate.

A summary of changes in outstanding stock options for the six months ended June 30, 2011 is as follows:

			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value

					(In years)		(In thousands)
Outstanding at January 1, 2011	952,669		$	9.58
Granted	153,868			5.89
Exercised	(5,162	)		4.14
Forfeited	(4,257	)		7.46
Expired	(19,324	)		9.38

Outstanding at June 30, 2011	1,077,794		$	9.09		6.4	$	15

Options exercisable at June 30, 2011	300,544		$	12.12		4.4	$	15

The following table summarizes the information about stock options outstanding and exercisable as of June 30, 2011:

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Outstanding at June 30, 2011		Weighted Average Remaining Contractual Life in Years		Weighted Average Exercise Price		Exercisable at June 30, 2011		Weighted Average Exercise Price
$.01 to $4.99		6,871		2.02	$	2.93		6,871	$	2.93
$5.00 to $7.45		162,589		9.36		5.92		8,721		6.52
$7.46 to $9.99		734,896		6.49		8.29		111,514		7.56
$10.00 to $14.99		45,387		1.96		12.28		45,387		12.28
$15.00 to $19.99		81,388		3.90		15.03		81,388		15.03
$20.00 to $24.99		46,663		3.94		20.19		46,663		20.19

		1,077,794		6.40	$	9.09		300,544	$	12.12

Nonvested RSUs and restricted stock outstanding as of June 30, 2011 and changes during the six months ended June 30, 2011 were as follows:

	RSUs					Restricted Stock

	Number of Shares			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2011		634,771		$	7.53		412,500		$	6.80
Granted		344,084			7.19		—			—
Vested		(232,409	)		7.16		(137,500	)		6.80
Forfeited		(94,984	)		7.54		—			—

Nonvested at June 30, 2011		651,462		$	7.52		275,000		$	6.80