STOCK-BASED COMPENSATION

On the Effective Date of the emergence from Chapter 11 bankruptcy, the Company adopted the 2014 Equity Incentive Plan which authorizes the issuance of up to 1,000,000 shares of Class A Common Stock to the Company’s employees, officers, directors and other individuals providing services to the Company or its affiliates pursuant to options, stock appreciation rights, restricted stock units, restricted stock, performance awards, dividend equivalent rights and other stock based awards, as well as cash based awards. On November 21, 2014, Centrus issued stock options to officers and restricted stock units to non-employee, independent directors in accordance with the term of the 2014 Equity Incentive Plan.

A summary of stock-based compensation costs related to the 2014 Equity Incentive Plan and expired plans follows (in millions):



	Successor				Predecessor
	Year Ended December 31, 2015		Three Months Ended December 31, 2014		Nine Months Ended September 30, 2014

Total stock-based compensation costs:
Restricted stock and restricted stock units	$	0.2	$	0.1	$	0.6
Stock options, performance awards and other	0.2		0.1		—
Expense included primarily in selling, general and administrative expense	$	0.4	$	0.2	$	0.6

Total recognized tax benefit	$	—	$	—	$	—

The total recognized tax benefit is reported at the federal statutory rate net of the tax valuation allowance.

As of December 31, 2015, there was $0.9 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock-based payments granted, of which $0.1 million relates to restricted stock units and $0.8 million relates to stock options. That cost is expected to be recognized over a weighted-average period of 2.7 years.

Of the 1.0 million shares of common stock authorized for issuance under the 2014 equity incentive plan, there were approximately 462,000 shares available for future awards under the plans at December 31, 2015 (excluding outstanding awards which terminate or are cancelled without being exercised), all of which are available for grants of stock options, restricted stock or restricted stock units, performance awards and other stock-based awards if authorized by the Compensation, Nominating and Governance Committee of the Board of Directors.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the requisite service period, on a straight-line basis the over the vesting period.

Restricted Stock Units and Restricted Stock

The fair value of restricted stock and restricted stock units is determined based on the closing price of Centrus’ Class A Common Stock on the grant date. Compensation cost for restricted stock and restricted stock units is amortized to expense on a straight-line basis over the vesting period.

There were no restricted stock issuances in the 2015, three-month ended December 31, 2014 and nine-month ended September 30, 2014. Sale of shares of restricted stock is restricted prior to the date of vesting. Unvested shares of restricted stock outstanding immediately prior to the Effective Date were cancelled pursuant to the Plan of Reorganization.

Non-employee, independent directors are granted restricted stock units as part of their compensation for serving on the Board of Directors which may only be settled in Centrus Class A Common Stock. The restricted stock units vest over one year, however, vesting is accelerated upon (1) the director attaining eligibility for retirement, (2) termination of the director’s service by reason of death or disability, or (3) a change in control. Settlement of restricted stock units granted to non-employee, independent directors is made in shares of Centrus Class A Common Stock only upon the director’s retirement or other end of service.

There were 40,000 shares of restricted stock units issued on May 7, 2015, which will vest in one year. All restricted stock units settleable for common stock of the Predecessor Company were either surrendered or cancelled prior to or on the Effective Date of the Plan of Reorganization.

Stock Options

The intrinsic value of an option, if any, represents the excess of the fair value of the common stock over the exercise price. The fair value of stock option awards is estimated using the Black-Scholes option pricing model, which includes a number of assumptions including Centrus’ estimates of stock price volatility, employee stock option exercise behaviors, future dividend payments, and risk-free interest rates.

The expected term of options granted is the estimated period of time from the beginning of the vesting period to the date of expected exercise or other settlement, based on historical exercises and post-vesting terminations. Centrus has estimated the expected term using the simplified method described in SEC Staff Accounting Bulletin No. 107/110, Share-Based Payment, due to the lack of historical exercise and post-vesting termination information available for the Successor Company. Future stock price volatility is estimated based on historical volatility for the recent period equal to the expected term of the options. Centrus has estimated volatility based on the Predecessor’s Company’s highest reported historical volatility. The risk-free interest rate for the expected option term is based on the U.S. Treasury yield curve in effect at the time of grant. No cash dividends are expected in the foreseeable future and, therefore, an expected dividend yield of zero is used in the option valuation model. Historical data are used to estimate pre-vesting option forfeitures at the time of grant. Estimates for option forfeitures are revised in subsequent periods if actual forfeitures differ from those estimates. Compensation expense is recognized for stock option awards that are expected to vest.

Assumptions used in the Black-Scholes option pricing model to value option grants in 2015 and the three months ended December 31, 2014 follow:



	Successor
	Year Ended December 31, 2015	Three Months Ended December 31, 2014

Risk-free interest rate	1.91%	1.89%
Expected volatility	75%	75%
Expected option life (years)	6	6
Weighted-average grant date fair value	$2.62	$3.72
Options granted (in thousands)	437	92

Stock options vest and become exercisable in equal annual installments over a three or four year period and expire ten years from the date of grant. A summary of stock option activity follows:



	Stock Options (thousands)	Weighted Average Exercise Price	Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value (millions)

Outstanding at December 31, 2014	93	$5.62
Granted	437	$3.96
Exercised	—	—
Forfeited	(55)	$5.62
Outstanding at December 31, 2015	475	$4.09	9.3	—
Exercisable at December 31, 2015	12	$5.62	8.9	—

Stock options outstanding and options exercisable at December 31, 2015, follow:



Stock Exercise Price	Options Outstanding (thousands)	Weighted Average Remaining Contractual Life in Years	Options Exercisable (thousands)

$5.62	37.5	8.9	12.0
$4.37	300.0	9.2	-
$3.90	22.5	9.6	-
$3.93	15.0	9.6	-
$2.71	50.0	9.8	-
$2.75	50.0	9.8	-