Share-Based Compensation Plans

In 2016, the Company adopted the 2016 Equity Incentive Plan (as amended from time to time, the “2016 Plan”). The Company also adopted the Inducement Plan (as amended from time to time, the “Inducement Plan,” and, together with the 2016 Plan, the “Plans”) on December 15, 2016. Under the Plans, 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.

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.

We receive a tax deduction for certain stock option exercises during the period the stock option awards are exercised, generally for the excess of the market value on the exercise date over the exercise price of the stock option awards. We receive an additional tax deduction when restricted stock awards vest at a higher value than the value used to recognize compensation expense at the date of grant. We are required to report excess tax benefits from the award of equity instruments as operating cash flows.

For the years ended December 31, 2018 and 2017, no incremental tax benefit was recognized for shares that vested due to the offsetting valuation allowance as discussed in Note 3 of these consolidated financial statements.

The expense for awards issued under the Plans to both employees and non-employees, which was recorded in “General and administrative, net” in the accompanying consolidated statements of operations was $6.0 million and $6.8 million for the years ended December 31, 2018 and 2017, respectively.

We capitalized in property and equipment $0.5 million and $0.2 million of share-based compensation for the years ended December 31, 2018 and 2017, 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.

Our shares available for future grant under the Plans were 253,293 at December 31, 2018.

Stock Option Awards

The compensation cost related to these awards is based on the grant date fair value and is 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 assumptions for stock option awards issued during the year ended December 31, 2018:



	Stock Option Valuation Assumptions
Expected dividend	—
Expected volatility	66.55		%
Risk-free interest rate	2.83		%
Expected life of stock option awards (in years)	6.0
Grant-date exercise price	$	31.14
Grant-date fair value	$	19.30

At December 31, 2018, we had $6.4 million in unrecognized compensation cost related to stock option awards. The following table represents stock option award activity for the year ended December 31, 2018:



	Shares		Wtd. Avg. Exer. Price
Options outstanding, beginning of period	508,730		$	26.82
Options granted	201,406		$	31.14
Options forfeited	(24,365	)	$	26.96
Options canceled	(11,997	)	$	26.96
Options exercised	(29,199	)	$	24.27
Options outstanding, end of period	644,575		$	28.28
Options exercisable, end of period	159,127		$	26.84

Our outstanding stock option awards at December 31, 2018 had $0.1 million in aggregate intrinsic value. At December 31, 2018 the weighted average remaining contract life of stock option awards outstanding was 7.2 years and exercisable was 3.1 years. The total intrinsic value of stock option awards exercisable as of December 31, 2018 was less than $0.1 million.

Restricted Stock Units

The Plans allow 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 expensed over the requisite service period (generally one to five years).

As of December 31, 2018, we had unrecognized compensation expense of $6.2 million related to our restricted stock units which is expected to be recognized over a weighted-average period of 2.3 years.

The following table represents restricted stock unit activity for the year ended December 31, 2018:



	Shares		Wtd. Avg. Grant Price
Restricted units outstanding, beginning of period	346,740		$	26.99
Restricted stock units granted	126,728		$	28.63
Restricted stock units forfeited	(26,100	)	$	26.53
Restricted stock units vested	(106,690	)	$	26.99
Restricted stock units outstanding, end of period	340,678		$	27.64

Performance Share Units

On February 20, 2018, the Company granted 30,700 performance share units for which the number of shares earned is based on the total shareholder return (“TSR”) of the Company's common stock relative to the TSR of its selected peers ("Peer Group") during the performance period from January 1, 2018 to December 31, 2020 ("Performance Period"). The awards contain market conditions which allow a payout ranging between 0% payout and 200% of the target payout. The fair value as of the date of valuation was $41.66 per unit or 150.61% as a percentage of stock price with a remaining performance period of 2.1 years. The compensation expense for these awards is based on the per unit grant date valuation using a Monte-Carlo simulation multiplied by the target payout level. The payout level is calculated based on actual stock price performance achieved during the performance period. The awards have a cliff-vesting period of three years.

As of December 31, 2018, we had unrecognized compensation expense of $0.9 million related to our performance share units. Expense is calculated based on the assumption of a target payout of 100.0%. No shares vested during the year ended December 31, 2018

Employee Savings Plan

We have a savings plan under Section 401(k) of the Internal Revenue Code. The Company contributed on behalf of eligible employees an amount up to 100% of the first 6% of compensation based on the contributions made by the eligible employees in 2018 and 2017. The Company's 2018 plan contributions of $0.6 million were paid in cash during each pay period. The Company's 2017 plan contributions of $0.5 million were paid in cash during the first quarter of 2018. These amounts were recorded as “General and administrative, net” on the accompanying consolidated statements of operations.