11. SHARE-BASED COMPENSATION

 

Prior to the Separation, our employees participated in the Masco share-based compensation program and received restricted share awards and stock options. Effective July 1, 2015, our employees participate in the 2015 TopBuild Long-Term Incentive Plan (the “2015 Plan”).  The 2015 Plan authorizes the Board of Directors to grant stock options, stock appreciation rights, restricted shares, restricted share units, performance awards, and dividend equivalents.  No more than 4.0 million shares of common stock may be issued under the 2015 Plan. 

 

Prior to the Separation, share-based compensation expense was allocated to TopBuild based on the awards and options previously granted by Masco to TopBuild employees.  Outstanding, unvested Masco stock options and restricted share awards held by employees of TopBuild as of June 30, 2015, were forfeited upon Separation and replaced with TopBuild long-term incentive awards, issued under the 2015 Plan, immediately subsequent to the Separation.  The replacement awards are subject to the same terms and conditions in effect prior to the Separation and are of generally equivalent value.

 

Included in selling, general, and administrative expenses is share-based compensation expense of $1.6 million and $0.8 million for the three months ended March 31, 2016 and 2015, respectively.

 

The following table presents a summary of our share-based compensation activity for the three months ended March 31, 2016 (in thousands, except per share amounts):

 

 

As of March 31, 2016, there was $16.8 million of unrecognized compensation expense related to unvested restricted share awards; such awards had a weighted average remaining vesting period of 2.2 years.

 

As of March 31, 2016, there was $6.8 million of unrecognized compensation expense related to unvested stock options; such options had a weighted average remaining vesting period of 2.3 years and weighted average remaining contractual life of 9.4 years. 

 

Our RSAs with performance-based conditions are evaluated on a quarterly basis with adjustments to compensation expense based on the likelihood of the performance target being achieved or exceeded.  The following table shows the range of payouts and the related expense for our RSAs with performance-based conditions, dollars in thousands:

 

 

The fair value of our RSAs with a market-based condition granted under the 2015 Plan was determined using a Monte Carlo simulation.  The following are key inputs in the Monte Carlo analysis:

 

 

The fair values of stock options granted under the 2015 Plan were calculated using the Black-Scholes Options Pricing Model.  The following table presents the assumptions used to estimate the fair values of options granted in 2016 and 2015: