11. Share-Based and Cash-Based Incentive Compensation

As allowed by the Plan, in 2014, 2013 and 2012, the Company granted RSUs to certain of its employees.  In 2014, 2013 and 2012, restricted stock was granted to the Company’s non-employee directors under the Directors Compensation Plan.  In addition to share-based compensation, the Company granted cash-based incentive awards to substantially all eligible employees in 2014, 2013 and 2012.

On May 7, 2013, after receiving shareholder approval, 4,000,000 shares of common stock were added to the amount available for issuance under the Plan.  As of December 31, 2014, there were 4,790,082 shares of common stock available for issuance in satisfaction of awards under the Plan and 500,564 shares of common stock available for issuance in satisfaction of awards under the Directors Compensation Plan.  The shares available for both plans are reduced when restricted stock is granted.  RSUs reduce the shares available in the Plan only when RSUs are settled in shares of common stock, net of withholding tax.  Although the Company has the option to settle RSUs in stock or cash at vesting, only common stock has been used to settle vested RSUs to date.

Restricted Stock

Under the Directors Compensation Plan, shares of restricted stock (“Restricted Shares”) were issued in 2014, 2013 and 2012 to the Company’s non-employee directors.  See Note 10 for additional information concerning Restricted Shares.  A summary of activity related to Restricted Shares is as follows:

Subject to the satisfaction of service conditions, the Restricted Shares outstanding as of December 31, 2014 are expected to vest as follows:

Restricted stock fair value at grant date and vested date: The grant date fair value of restricted stock granted during 2014, 2013 and 2012 was $0.3 million, $0.3 million and $0.4 million, respectively, based on the Company’s closing price on the date of grant.  The fair value of the restricted stock that vested during 2014, 2013 and 2012 was $0.3 million, $0.4 million and $0.5 million, respectively, based on the Company’s closing price on the date of vesting.

Restricted Stock Units

During 2014, 2013 and 2012, the Company granted RSUs to certain employees, with nearly all grants being contingent upon meeting specified performance requirements.  The grants are subject to adjustments at the end of the applicable performance period using a predefined scale based on the Company achieving certain predetermined performance criteria.  See Note 10 for additional information concerning RSUs.

The fair value of the RSUs granted in 2014 was determined using the Company’s closing price on the grant dates as the performance measures were all company-specific performance measures comprised of Adjusted EBITDA and Adjusted EBITDA Margin.  

The fair value of the RSUs granted in 2013 was determined separately for each component.  For the components related to the company-specific performance measures (Adjusted EBITDA and Adjusted EBITDA Margin), the fair value was determined using the Company’s closing price on the grant date.  The components related to Adjusted EBITDA and Adjusted EBITDA Margin comprised 40% and 30%, respectively, of the amount granted.  For the component related to TSR ranking, the fair value was determined using a Monte Carlo simulation probabilistic model.  The component related to TSR ranking totaled 30% of the amount granted, with 10% for each of the three-year performance periods.  The inputs used in the model for the Company and the peer companies were: average closing stock prices during January 2013; risk-free interest rates using the LIBOR ranging from 0.27% to 0.91% over the service period; expected volatilities ranging from 30% to 63%; expected dividend yields ranging from 0.0% to 3.1%; and correlation factors ranging from a negative 84% to a positive 95%.  The expected volatilities, expected dividends and correlation factors were developed using historical data.  For the RSUs granted in 2013 that were not subject to performance measures, the fair value was determined using the closing price on the date of grant.

The fair value of the RSUs granted in 2012 was determined separately for the two components.  For the component related to the company-specific performance measure, which was comprised of only EPS, the fair value was determined using the Company’s closing price on the grant date.  The component related to EPS comprised 70% of the amount granted.  For the component related to TSR ranking, the fair value was determined by using a Monte Carlo simulation probabilistic model.  The component related to TSR ranking totaled 30% of the amount granted, with 10% for each of the three-year performance periods.  The inputs used in the model for the Company and the peer companies were: average closing stock prices during January 2012; risk-free interest rates using the LIBOR ranging from 0.15% to 0.72% over the service period; expected volatilities ranging from 33% to 74%; expected dividend yields ranging from 0.0% to 2.5%; and correlation factors ranging from a negative 67% to a positive 94%.  The expected volatilities, expected dividends and correlation factors were developed using historical data.

A summary of activity related to RSUs is as follows:

Subject to the satisfaction of service conditions, the RSUs outstanding as of December 31, 2014 are eligible to vest in the year indicated in the table below:

RSUs fair value at grant date: During 2014, 2013 and 2012, the grant date fair value of RSUs granted was $20.1 million, $12.8 million and $14.3 million, respectively.

RSUs fair value at vested date: The fair value of the RSUs that vested during 2014, 2013 and 2012 was $2.0 million, $7.2 million and $20.0 million, respectively, based on the Company’s closing price on the vesting date.

Common Stock

A grant and issuance of 42,547 shares of common stock was made in March 2014 to the CEO pursuant to the terms of his 2013 annual incentive compensation award.  The number of shares was determined after deductions for withholding and payroll taxes and the shares were valued at the Company’s closing price as of the date of grant.  The grant and issuance of shares of common stock pursuant to the terms of the CEO’s 2014 annual incentive compensation award will be made during the first quarter of 2015.  See Note 10 for additional information concerning the CEO annual incentive compensation award.

    Share-Based Compensation

A summary of compensation expense under share-based payment arrangements and the related tax benefit is as follows (in thousands):

As of December 31, 2014, unrecognized share-based compensation expense related to our awards of Restricted Shares, RSUs and common stock was $0.5 million, $16.5 million and $0.1 million, respectively.  Unrecognized compensation expense will be recognized through April 2017 for restricted shares, November 2016 for RSUs and February 2015 for common stock.

Cash-based Incentive Compensation

As defined by the Plan, annual incentive awards payable in cash may be granted to eligible employees.  These awards are performance-based awards consisting of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria.  Generally, the performance period is the calendar year and determination and payment is made in cash in the first quarter of the following year.

Share-Based Compensation and Cash-Based Incentive Compensation Expense

A summary of incentive compensation expense is as follows (in thousands):