(3) Share-Based Compensation

Emergence from Voluntary Reorganization

Upon the Company's emergence from bankruptcy on April 22, 2016, as discussed in Note 11, the Company’s common stock was canceled and new common stock was issued. The Company's previous share-based compensation awards were either vested or canceled upon the Company's emergence from bankruptcy.

Share-Based Compensation Plans

Upon the Company's emergence from bankruptcy on April 22, 2016, as discussed in Note 11, the Company's previous share-based compensation plans were canceled and the new Company 2016 Equity Incentive Plan was approved in accordance with the joint plan of reorganization. Under the previous share-based compensation plan the outstanding restricted stock awards and restricted stock unit awards for most employees vested on an accelerated basis while awards issued to certain officers of the Company and the Board of Directors were canceled.

For awards granted after emergence from bankruptcy, the Company does not estimate the forfeiture rate during the initial calculation of compensation cost but rather has elected to account for forfeitures in compensation cost when they occur. For the predecessor periods, the Company had estimated the forfeiture rate for share-based compensation during the initial calculation of compensation cost.

The Company computes a deferred tax benefit for restricted stock awards, unit awards and stock options expected to generate future tax deductions by applying its effective tax rate to the expense recorded. For restricted stock units, the Company's actual tax deduction is based on the value of the units at the time of vesting.

Share-based compensation for the predecessor and successor periods are not comparable. The expense for awards issued to both employees and non-employees, which was recorded in “General and administrative, net” in the accompanying condensed consolidated statements of operations was $1.5 million and $0.7 million for the three months ended March 31, 2017 (successor) and 2016 (predecessor), respectively. Capitalized share-based compensation was less than $0.1 million and $0.2 million for the three months ended March 31, 2017 (successor) and 2016 (predecessor), respectively.

We view stock option awards and restricted stock unit awards with graded vesting as single awards with an expected life equal to the average expected life of component awards, and we amortize the awards on a straight-line basis over the life of the awards.

Stock Option Awards

The compensation cost related to stock option awards is based on the grant date fair value and is typically expensed over the vesting period (generally one to five years). We use the Black-Scholes-Merton option pricing model to estimate the fair value of stock option awards with the following weighted average assumptions for stock option awards issued during the three months ended March 31, 2017 (successor):



	Stock Option Valuation Assumptions
Expected dividend	—
Expected volatility	70.2		%
Risk-free interest rate	1.98		%
Expected life of stock option awards (in years)	5.7 years
Grant-date fair value	$	17.58

To estimate expected volatility of our 2017 stock option grants we used the historical volatility of stock prices based on a group of our peer companies.

At March 31, 2017, we had $6.7 million unrecognized compensation cost related to stock option awards. The following tables represents stock option award activity for the three months ended March 31, 2017 (successor):



	Shares	Wtd. Avg. Exer. Price
Options outstanding, beginning of period (successor)	105,811	$	23.25
Options granted	370,062	$	28.62
Options canceled	—	$	—
Options exercised	—	$	—
Options outstanding, end of period (successor)	475,873	$	27.43
Options exercisable, end of period (successor)	60,847	$	23.25

Our outstanding stock option awards at March 31, 2017 had $0.6 million aggregate intrinsic value. At March 31, 2017 the weighted average remaining contract life of stock option awards outstanding was 7.6 years and exercisable was 1.4 years. The total intrinsic value of stock option awards exercisable for the three months ended March 31, 2017 was $0.3 million.

Restricted Stock Units

The 2016 equity incentive compensation plan allows for the issuance of restricted stock unit awards that generally may not be sold or otherwise transferred until certain restrictions have lapsed. The compensation cost related to these awards is based on the grant date fair value and is typically expensed over the requisite service period (generally one to five years).

As of March 31, 2017, we had unrecognized compensation expense of $10.3 million related to our restricted stock units which is expected to be recognized over a weighted-average period of 3.1 years.

The following table represents restricted stock unit award activity for the three months ended March 31, 2017 (successor):



	Shares		Grant Date Price
Restricted stock units outstanding, beginning of period (successor)	178,847		$	23.25
Restricted stock units granted	287,257		$	29.07
Restricted stock units canceled	—		$	—
Restricted stock units vested	(30,500	)	$	23.25
Restricted stock units outstanding, end of period (successor)	435,604		$	27.09