STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

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 nine months ended September 30, 2013 and 2012(in thousands):

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2013		2012		2013		2012
Cost of revenue	$	4	$	2	$	9	$	6
Selling and marketing expense	242		145		765		504
General and administrative expense	976		1,026		2,885		2,662
Product development	190		136		619		393
Total non-cash compensation expense	$	1,412	$	1,309	$	4,278	$	3,565

The forms of stock-based awards granted to Tree.com employees are principally 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 market condition vesting, where certain market conditions 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 awarded and expensed ratably as non-cash compensation over the vesting term. 

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.

During February 2013, our Chairman and CEO was granted 62,500 shares of restricted stock with a fair value of $1.1 million and a three year vesting period.  The fair value of the restricted stock is based upon the market price of the underlying common stock as of the date of grant.  Compensation expense is recognized on a straight-line basis over the vesting period.  He was also granted 62,500 shares of restricted stock which vest based on the achievement of a market-based performance target within three years, but not earlier than one year from the grant date. The market-based performance target was achieved during the third quarter of 2013. The fair value of the market-based performance restricted stock was determined to be $0.9 million using a Monte Carlo simulation model.  The fair value on grant date is recognized over the requisite service period.

A summary of changes in outstanding stock options for the nine months ended September 30, 2013 is as follows:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
					(in years)	(in thousands)
Options outstanding at January 1, 2013	1,072,503		$	8.97
Granted	—		—
Exercised	(27,029	)	7.79
Forfeited	—		—
Expired	(1,737	)	11.63
Options outstanding at September 30, 2013	1,043,737		8.99		5.00	$	18,020
Options exercisable at September 30, 2013	892,445		$	9.35	4.47	$	15,092

The following table summarizes the information about stock options outstanding and exercisable as of September 30, 2013:

	Options Outstanding				Options Exercisable
Range of Option Exercise Prices	Outstanding	Weighted Average Remaining Contractual Life in Years	Weighted Average Exercise Price		Exercisable	Weighted Average Exercise Price
$0.01 to $4.99	173	0.45	$	2.49	173	$	2.49
$5.00 to $7.45	304,327	7.96	6.65		153,035	6.39
$7.46 to $9.99	602,418	4.27	8.46		602,418	8.46
$10.00 to $14.99	10,029	1.00	12.27		10,029	12.27
$15.00 to $19.99	80,127	1.68	15.00		80,127	15.00
$20.00 to $20.19	46,663	1.68	20.19		46,663	20.19
As of September 30, 2013	1,043,737	5.00	$	8.99	892,445	$	9.35

Nonvested RSUs, restricted stock and restricted stock with a market condition as of September 30, 2013 and changes during the nine months ended September 30, 2013 are as follows:

	RSUs				Restricted Stock				Restricted Stock Market Condition
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Nonvested at January 1, 2013	757,111		$	9.09	187,501		$	7.44	—	$	—
Granted	289,745		18.04		62,500		17.49		62,500	13.93
Vested	(276,291	)	9.60		(187,501	)	7.44		—	—
Forfeited	(76,545	)	9.56		—		—		—	—
Nonvested at September 30, 2013	694,020		$	12.69	62,500		$	17.49	62,500	$	13.93