Equity-Based Compensation

3 Months Ended

Mar. 31, 2012

Equity-Based Compensation

Equity-Based Compensation

Note 9                    Equity-Based Compensation

For the three months ended March 31, 2012 and 2011, we recognized stock-based compensation expense of $4.6 and $1.6, respectively.

During the three months ended March 31, 2012, there were 794,000 RSUs granted to certain directors and employees of our Company.  RSUs awarded to employee participants are accounted for as liability instruments and recorded in accrued expenses in our consolidated balance sheets.   RSUs awarded to non-employee directors are accounted for as equity instruments.

There were no stock options granted in the three months ended March 31, 2012.   Stock options awarded to employees or non-employee directors are accounted for as equity instruments.

In connection with the Successor Company grant of stock-based compensation awards, we perform a valuation of our common stock equity.  Our valuation analysis consists of a combination of the income and market comparable approach, discounted for lack of marketability based on an options pricing method proposed by John Finnerty (“Finnerty Model”) under Level 3 of the fair value hierarchy.  We also consider, but have not used, the market transaction approach due to the lack of relevant transactions.  The income approach utilizes cash flows based on our long-term outlook through the valuation date.  Terminal value was calculated using a modified Gordon growth formula.  Market multiples of peer companies were calculated and utilized in application of a market comparable approach.  We applied multiple ranges for revenue and EBITDA.

The table below sets forth the key assumptions utilized in the valuation of our common stock equity:

	Successor Company
	Valuation Date
	March 31, 2012
Income approach
Discount rate	16.0		%
Perpetual growth rate	2.0		%
Market comparable approach
EBITDA market multiples	5.50 to 6.00
Revenue market multiples	0.50 to 0.55
Finnerty model
Discount for lack of marketability	20.0		%
Volatility (a)	50.0		%
Risk-free rate (b)	0.3		%
Dividend yield (c)	0.0		%
Estimated fair value of our common stock	$	12.27

(a)Volatility is calculated based on comparable public company volatilities.

(b)Risk-free rate is calculated based on U.S. Treasury zero-coupon security yields.

(c)Dividend yield is based on our historical and expected dividends.

A summary of RSUs activity under the 2010 Plan was as follows:

	Successor Company
	RSUs
	Shares (000’s)		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	54		$	22.80
Granted, total	794		11.97
Granted, vested	(350	)	11.91
Nonvested at March 31, 2012	498		$	13.19