Equity-based Compensation

3 Months Ended

Mar. 31, 2015

Equity-based Compensation

Equity-based Compensation

11. 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 $25.2 million and $17.9 million during the three months ended March 31, 2015 and 2014, respectively. The total tax benefit for the three months ended March 31, 2015 and 2014 was $8.4 million and $6.1 million, respectively. Additionally, we expensed a tax shortfall related to equity-based compensation of $0.1 million and $0.1 million for the three months ended March 31, 2015 and 2014 respectively. The fair value of awards vested during the three months ended, March 31, 2015 and 2014 was approximately $0.8 million and $1.4 million, respectively. The Company granted both restricted stock awards and restricted stock units with service vesting criteria and granted both restricted stock awards and restricted stock units with a combination of market and service criteria under the LTIP. Our outstanding awards vest over a three or four year period. Restricted stock awards are issued and included in the number of outstanding shares upon the date of grant and, if such awards are forfeited, they become treasury stock. Upon vesting, restricted stock units become issued and outstanding stock.

The following table reflects the outstanding restricted stock awards as of March 31, 2015:

			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, 2014	3,240		$	16.95	3,361	$	13.00
Granted	660		8.64		—	—
Forfeited	—		—		—	—
Vested	(28	)	9.61		—	—
Outstanding at March 31, 2015	3,872		15.59		3,361	13.00

The following table reflects the outstanding restricted stock units as of March 31, 2015:

			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, 2014	3,367		$	10.76	3,246		$	15.66
Granted	1,062		8.64		3,308		12.96
Forfeited	(13	)	11.15		(4	)	16.82
Vested	(58	)	11.36		—		—
Outstanding at March 31, 2015	4,358		10.23		6,550		14.29

As of March 31, 2015, total equity-based compensation to be recognized on unvested restricted stock awards and restricted stock units is $109.8 million over a weighted average period of 1.64 years. In January 2015, the board of directors approved an amendment to the May 16, 2011 LTIP to add 15.0 million shares to the plan, subject to shareholder approval at the Annual General Meeting in June 2015. At March 31, 2015, the Company had approximately 8.8 million shares that remain available for issuance under the LTIP.

For restricted stock awards and 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 100% of the awards granted for restricted stock awards and up to 200% of the awards granted for restricted stock units. The grant date fair value of these awards ranged from $6.70 to $13.57 per award for restricted stock awards and $12.96 to $15.81 per award for restricted stock units. The Monte Carlo simulation model 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 a combination of our historical volatility and implied volatility and the historical and implied volatilities of our peer companies and ranged from 30% to 76%. 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 awards and 0.5% to 1.2% for restricted stock units.