Share-Based Compensation and Cash-Based Incentive Compensation
|9 Months Ended|
Sep. 30, 2018
|Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]|
|Share-Based Compensation and Cash-Based Incentive Compensation||
8. Share-Based Compensation and Cash-Based Incentive Compensation
Awards to Employees. In 2010, the W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan (as amended from time to time, the “Plan”) was approved by our shareholders. During 2018, 2017 and 2016, the Company granted restricted stock units (“RSUs”) under the Plan to certain of its employees. RSUs are a long-term compensation component and are granted to certain employees, and are subject to satisfaction of certain predetermined performance criteria and adjustments at the end of the applicable performance period based on the results achieved. In addition to share-based awards, the Company may grant to its employees cash-based incentive awards under the Plan, which are both a short-term and long-term compensation component and are subject to satisfaction of certain predetermined performance criteria.
As of September 30, 2018, there were 13,342,827 shares of common stock available for issuance in satisfaction of awards under the Plan. The shares available for issuance are reduced on a one-for-one basis when RSUs are settled in shares of common stock, which shares of common stock may be issued net of withholding tax if an awardee elects to satisfy his or her tax liability through the withholding of shares. The Company has the option following vesting to settle RSUs in stock or cash, or a combination of stock and cash. The Company expects to settle RSUs that vest in the future using shares of common stock.
RSUs currently outstanding relate to the 2018, 2017 and 2016 grants, which are subject to predetermined performance criteria applied against the applicable performance period. These RSUs continue to be subject to employment-based criteria and vesting generally occurs in December of the second year after the grant. See the table below for anticipated vesting by year.
We recognize compensation cost for share-based payments to employees over the period during which the recipient is required to provide service in exchange for the award. Compensation cost is based on the fair value of the equity instrument on the date of grant. The fair values for the RSUs granted during 2018, 2017 and 2016 were determined using the Company’s closing price on the grant date. We are also required to estimate forfeitures, resulting in the recognition of compensation cost only for those awards that are expected to actually vest.
All RSUs awarded are subject to forfeiture until vested and cannot be sold, transferred or otherwise disposed of during the restricted period.
A summary of activity related to RSUs during the nine months ended September 30, 2018 is as follows:
For the RSUs that vested during 2018, the aggregate fair value at the grant dates was $0.1 million and the aggregate fair value at the vesting date was $0.2 million.
For the outstanding RSUs issued to the eligible employees as of September 30, 2018, vesting is expected to occur as follows (subject to any forfeitures):
Awards to Non-Employee Directors. Under the W&T Offshore, Inc. 2004 Directors Compensation Plan (as amended from time to time, the “Director Compensation Plan”), shares of restricted stock (“Restricted Shares”) have been granted to the Company’s non-employee directors. Grants to non-employee directors were made during 2018, 2017 and 2016. As of September 30, 2018, there were 128,980 shares of common stock available for issuance in satisfaction of awards under the Director Compensation Plan. The shares available are reduced on a one-to-one basis when Restricted Shares are granted.
We recognize compensation cost for share-based payments to non-employee directors over the period during which the recipient is required to provide service in exchange for the award. Compensation cost is based on the fair value of the equity instrument on the date of grant. The fair values for the Restricted Shares granted were determined using the Company’s closing price on the grant date. No forfeitures were estimated for the non-employee directors’ awards.
The Restricted Shares are subject to service conditions and vesting occurs at the end of specified service periods unless approved by the Board of Directors. Restricted Shares cannot be sold, transferred or disposed of during the restricted period. The holders of Restricted Shares generally have the same rights as a shareholder of the Company with respect to such Restricted Shares, including the right to vote and receive dividends or other distributions paid with respect to the Restricted Shares.
A summary of activity related to Restricted Shares is as follows:
For the Restricted Shares that vested during 2018, the aggregate fair value at the grant dates was $0.3 million and the aggregate fair value at the vesting date was $0.7 million.
For the outstanding Restricted Shares issued to the non-employee directors as of September 30, 2018, vesting is expected to occur as follows (subject to any forfeitures):
Share-Based Compensation. Share-based compensation expense is recorded in the line General and administrative expenses in the Condensed Consolidated Statements of Operations. Share-based compensation was lower in the three and nine months ended September 30, 2018 compared to the prior year period due to timing of the grant date and changes in the 2018 program. A summary of incentive compensation expense under share-based payment arrangements and the related tax benefit is as follows (in thousands):
Unrecognized Share-Based Compensation. As of September 30, 2018, unrecognized share-based compensation expense related to our awards of RSUs and Restricted Shares was $8.3 million and $0.4 million, respectively. Unrecognized share-based compensation expense will be recognized through November 2020 for RSUs and April 2021 for Restricted Shares.
Cash-Based Incentive Compensation. In addition to share-based awards, cash-based awards were granted under the Plan to eligible employees in 2018, 2017 and 2016. For 2018, there are two cash-based awards consisting of a long-term award and a short-term award. All cash-based awards are performance-based awards consisting of predetermined performance criteria applied against the applicable performance period. The 2018 long-term, cash-based awards will be eligible for payment on December 14, 2020 subject to participants meeting certain performance criteria. The 2018 short-term, cash-based awards will be eligible for payment on or about March 15, 2019 subject to participants meeting certain eligibility criteria. The cash-based awards for the 2018 short-term program, the 2017 program and the 2016 program include an additional financial condition requiring Adjusted EBITDA less reported Interest Expense Incurred (as defined in the awards) for any fiscal quarter plus the three preceding quarters to exceed defined levels measured over defined time periods for each cash-based award as described below. Expense for each program is recognized over the service period once the applicable financial condition is expected to be met, and the business criteria and individual performance criteria can be reasonably estimated for the applicable period.
A summary of compensation expense related to share-based awards and cash-based awards is as follows (in thousands):
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef