Share-based Compensation

3 Months Ended

Mar. 31, 2013

Share-based Compensation

Share-based Compensation

7.  Share-based Compensation

We issued stock options in the amounts shown in the following table.  The fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	Three Months Ended
	March 31,
	2013			2012
Number of options granted	—			40,000
Grant date fair value of options granted per share	$	—		$	8.16
Weighted average exercise price of options granted	$	—		$	14.27
Volatility (1)	—		%	61		%
Risk free interest rate (2)	—		%	1.4		%
Expected term (in years) (3)	—			6.3
Expected annual dividends	None			None

(1) Expected volatility is based on the historical volatility of our common stock over a preceding period commensurate with the expected term of the award.

(2) The risk free rate is based on the U.S. Treasury yield curve at the time of grant for periods consistent with the expected term of the option.

(3) We use historical data to estimate the expected term of the awards.

During the first quarter of 2013, we granted 644,677 restricted stock units (“RSUs”) to certain of our executive officers.  The RSUs were valued at $4.1 million and vest over three years.  Vesting for 212,384 of the RSUs is subject to (i) the grantees continued employment or providing service to us and (ii) reduction if the aggregate fair value of each grant exceeds a specified percentage of our Adjusted EBITDA (as defined) for 2013 (i.e., a market condition).  Vesting for the remaining 432,293 RSUs is subject to the grantees continued employment or providing service to us, and reaching certain revenue and Adjusted EBITDA growth targets (i.e., performance conditions).  Presently, we believe it is probable the 2013 performance conditions will be met.

In addition, during the first quarter of 2013 we also granted 84,622 RSUs to our outside directors as compensation for services.  These RSUs were valued at $0.6 million and vest over one to three years.

We recognized $3.2 million and $4.5 million in share-based compensation expense related to stock options, restricted stock awards and RSUs during the three months ended March 31, 2013 and 2012, respectively.  Unrecognized compensation costs related to unvested options and RSUs were $24.7 million at March 31, 2013.  These costs are expected to be recognized over the weighted average remaining vesting period of 2.7 years.