Equity-based Compensation

6 Months Ended

Jun. 30, 2013

Equity-based Compensation

Equity-based Compensation

9. Equity-based Compensation

Restricted Stock Awards and Restricted Stock Units

We record compensation expense equal to the fair value of share-based payments over the vesting periods of the Long-Term Incentive Plan (“LTIP”) awards. We recorded compensation expense from awards granted under our LTIP of $18.1 million and $17.6 million during the three months ended June 30, 2013 and 2012, respectively, and $37.0 million and $38.9 million during the six months ended June 30, 2013 and 2012, respectively. The tax benefit resulting from equity-based compensation expense for the three months ended June 30, 2013 and 2012 was $6.3 million and $6.1 million, respectively, and for the six months ended June 30, 2013 and 2012 was $12.7 million and $13.5 million, respectively. Additionally, we expensed a tax shortfall (the difference between the estimated tax deduction on the grant date and the actual tax deduction on the vest date) of $6.9 million and $7.4 million for the three months ended June 30, 2013 and 2012, respectively, and  $6.9 million and $7.4 million during the six months ended June 30, 2013 and 2012, respectively

The following table reflects the outstanding restricted stock awards as of June 30, 2013:

			Weighted-		Market / Service		Weighted-
	Service Vesting Restricted Stock		Average Grant-Date		Vesting Restricted Stock		Average Grant-Date
	Awards		Fair Value		Awards		Fair Value
	(In thousands)				(In thousands)
Outstanding at December 31, 2012	9,898		$	16.92	3,534		$	12.93
Granted	351		10.73		—		—
Forfeited	(187	)	15.14		(16	)	8.21
Vested	(3,336	)	17.27		—		—
Outstanding at June 30, 2013	6,726		16.48		3,518		12.95

The following table reflects the outstanding restricted stock units as of June 30, 2013:

			Weighted-		Market / Service		Weighted-
	Service Vesting Restricted Stock		Average Grant-Date		Vesting Restricted Stock		Average Grant-Date
	Units		Fair Value		Units		Fair Value
	(In thousands)				(In thousands)
Outstanding at December 31, 2012	1,023		$	10.59	825		$	15.81
Granted	1,310		10.83		990		15.44
Forfeited	(56	)	10.58		(34	)	15.81
Vested	(133	)	10.98		—		—
Outstanding at June 30, 2013	2,144		10.72		1,781		15.60

As of June 30, 2013, total equity-based compensation to be recognized on unvested restricted stock awards and restricted stock units is $164.9 million over a weighted average period of 2.42 years. At June 30, 2013, the Company had approximately 5.4 million shares that remain available for issuance under the LTIP.

For restricted stock awards with a combination of market and service vesting criteria, the number of common shares to be issued is determined by comparing the Company’s total shareholder return with the total shareholder return of a predetermined group of peer companies over the performance period and can vest in up to 100% of the awards granted. The grant date fair value of these awards ranged from $6.70 to $13.57 per award. The Monte Carlo simulation model used to estimate the grant-date fair value utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. The expected volatility utilized in the model was estimated using our historical volatility and the historical volatilities of our peer companies and ranged from 41.3% to 56.7%. The risk-free interest rate was based on the U.S. treasury rate for a term commensurate with the expected life of the grant and ranged from 0.5% to 1.1%.

For restricted stock units with a combination of market and service vesting criteria, the number of common shares to be issued is determined by comparing the Company’s total shareholder return with the total shareholder return of a predetermined group of peer companies over the performance period and can vest in up to 200% of the awards granted. The grant date fair value of these awards ranged from $15.44 to $15.81 per award. The Monte Carlo simulation model used to estimate the grant-date fair value utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. The expected volatility utilized in the model was estimated using our historical volatility and the historical volatilities of our peer companies and ranged from 53.0% to 54.0%. The risk-free interest rate was based on the U.S. treasury rate for a term commensurate with the expected life of the grant and ranged from 0.5% to 0.7%.