LONG-TERM COMPENSATION PLANS

At September 30, 2017, a total of 466,734 shares of common stock had been issued and 3,686,933 awarded RSUs and stock options were outstanding under the 2013 Plan.



	Nine Months Ended September 30, 2017
	Total		RSUs				Stock Options
	Total		Equity Classified		Liability Classified		Stock Options
Outstanding at December 31, 2016	3,003,003		2,117,493		320,312		565,198
Granted	1,356,683		1,100,481		—		256,202
Exercised/Issued	(104,625	)	(104,625	)	—		—
Forfeited	(393,128	)	(318,610	)	(634	)	(73,884	)
Outstanding at September 30, 2017	3,861,933		2,794,739		319,678		747,516

Equity Classified RSUs

During the nine months ended September 30, 2017, the Company granted RSUs under the 2013 Plan as follows:



	RSUs	Weighted average grant date fair value		Weighted average vesting period (months)
RSUs granted	1,100,481	$	16.18	31.7

Certain of the RSUs granted during the period contain performance or market vesting conditions in addition to a service vesting condition. RSUs granted with service or performance vesting conditions were valued at the grant date stock price. The grant date fair value of RSUs containing a market vesting condition were estimated using a Monte Carlo simulation of the performance of the Company's common stock relative to the S&P MidCap 400. Certain of the RSUs with performance or market vesting conditions also contain provisions for additional share awards in the event certain performance or market conditions are met at the end of certain applicable measurement periods. These conditions are generally based on ROIC or TSR targets.

The following assumptions were used to estimate the grant date fair value of RSUs containing a market vesting condition:



	Monte Carlo input assumptions
Weighted average expected term (years) ⁽¹⁾	3.00
Expected volatility ⁽²⁾	52.1%
Risk-free rate ⁽³⁾	1.50%


⁽¹⁾	Weighted average expected term is calculated based on the award service period.


⁽²⁾	Expected volatility is calculated based on a blend of the implied and historical equity volatility of an index of comparable companies over a period equal to the expected term.


⁽³⁾	Risk-free rate of return is based on an interpolation of U.S. Treasury rates to reflect an expected term of three years at the date of grant.

At September 30, 2017, the following equity classified RSUs were outstanding:



	September 30, 2017
Vesting Conditions:	Outstanding	Weighted average remaining service period (months)	Potential additional awards
Service-based	972,580	20.2	—
Performance-based	998,045	21.7	672,886
Market-based	824,114	23.6	1,554,968
Total	2,794,739	21.7	2,227,854

In addition, the Board has approved 83,333 RSUs under the 2013 Plan which vesting is conditioned upon the achievement of a certain 2018 adjusted EBITDA performance target, with a maximum payoff of 100%. This performance target will be established as a part of the 2018 planning process. As a result, these RSUs are and will be excluded from the above grant activity until the performance target is set.

For the three months ended September 30, 2017 and 2016, total compensation expense associated with equity classified RSUs totaled $3.0 million and $2.0 million, respectively. For the nine months ended September 30, 2017 and 2016, total compensation expense associated with RSUs classified as equity totaled $8.2 million and $4.6 million, respectively.

Stock Options

During the nine months ended September 30, 2017, the Company granted non-qualified stock options under the 2013 Plan as follows:



	Stock Options	Weighted average strike price per share		Weighted average grant date fair value per share
Stock options granted	256,202	$	13.30	$	6.05

Stock options are subject to graded vesting over a three-year period and have contractual lives of ten years from the grant date. Fair value of the grants is calculated using the Black-Scholes option pricing model at the grant date.

The following table provides the range of assumptions used in valuing stock option grants using the Black-Scholes option pricing method:



	Black-Scholes input assumptions
Weighted average expected term (years) ⁽¹⁾	6.0
Expected volatility ⁽²⁾	45.0%
Risk-free rate ⁽³⁾	2.09%
Expected dividend rate	—%


⁽¹⁾	Weighted average expected term is calculated based on the simplified method for plain vanilla options as the Company has concluded that its historical share option exercise experience does not provide a reasonable basis upon which to estimate expected term and certain alternative information to assist with estimating it is not easily obtainable.


⁽²⁾	Expected volatility is calculated based on a blend of the implied and historical equity volatility of an index of comparable companies over a period equal to the expected term.


⁽³⁾	Risk-free rate of return is based on an interpolation of U.S. Treasury rates to reflect an expected term of six years at the date of grant.

For the three months ended September 30, 2017 and 2016, compensation expense associated with stock options was $0.2 million and $0.1 million, respectively. For the nine months ended September 30, 2017 and 2016, compensation expense associated with stock options was $0.6 million and $0.3 million, respectively.