Employee Compensation Plans

Annual Incentive Plan

In June 2013, the Compensation Committee of the Company’s Board approved an annual incentive plan effective June 2013 for all employees and discontinued the Company’s then existing cash bonus program with final payments under the program of approximately $10.9 million made in July 2013. For certain members of management, the annual incentive plan incorporates objective performance criteria, individual performance goals and competitive target award levels for the 2013 performance year with payout percentages ranging from 0% to 200% of specified target levels based on actual performance. As of September 30, 2013, the Company had accrued approximately $19.9 million for the 2013 annual incentive for all employees, including an accrual for an annual incentive for specified members of management. As the payout for management is dependent on actual performance compared to established performance targets, the actual amount paid for 2013 performance under the annual incentive plan could differ significantly from the established target values.

Performance Units

In June 2013, the Compensation Committee of the Company’s Board approved the issuance of performance units to certain members of senior management under the Company’s existing long term incentive plan. In July 2013, the Company granted approximately 31,100 performance units that will be settled in cash. If minimum target thresholds are not met, the payout is reduced to zero. If performance exceeds the minimum thresholds, payout percentages could range from 50% to 200% of specified target values based on the Company's relative total shareholder return compared to a predetermined peer group with graded vesting over a performance period from July 2013 to December 2015.

Because the performance units contain a market-based performance component and will be settled in cash upon vesting, the Company recognized a liability equal to the estimated fair value of the units at the time the units were granted in July 2013 and will re-measure the liability at the end of each reporting period. Changes in the fair value of the units during the vesting period are recognized as compensation expense for the portion for which the requisite services have been rendered.

The performance units, the value of which depends on the Company’s relative total shareholder return compared to a predetermined peer group over the performance period, are valued for accounting purposes using a Monte Carlo simulation based on certain assumptions, including a volatility assumption based on the historical realized price volatility of the Company’s common stock and the common stock of the predetermined peer group and a risk-free interest rate based on the U.S. Treasury bond yields for a term commensurate with the approximate remaining vesting period. As of September 30, 2013, the Company had a liability of $0.8 million recorded for the performance units. The following table presents a summary of the fair value of the performance units and the related assumptions as of September 30, 2013.




Expected price volatility range	32.6	%	-	58.3%
Risk-free interest rate				0.4%
Fair value per unit				$80.60