Share-Based Awards and Cash-Based Awards
|12 Months Ended|
Dec. 31, 2018
|Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]|
|Share-Based Awards and Cash-Based Awards||
11. Share-Based Awards and Cash-Based Awards
Incentive Compensation Plan
The W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan, and subsequent amendments, (the “Plan”) was approved by our shareholders. The Plan covers the Company’s eligible employees and consultants and includes both cash and share-based compensation awards. The Plan grants the Compensation Committee of the Board of Directors administrative authority over all participants, and grants the Chief Executive Officer (“CEO”) with authority over the administration of awards granted to participants that are not subject to section 16 of the Exchange Act (as applicable, the “Committee”).
Pursuant to the terms of the Plan, the Committee establishes the vesting or performance criteria applicable to the award and may use a single measure or combination of business measures as described in the Plan. Also, individual goals may be established by the Committee. Performance awards may be granted in the form of stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), bonus stock, dividend equivalents, or other awards related to stock, and awards may be paid in cash, stock, or any combination of cash and stock, as determined by the Committee. The performance awards granted under the Plan can be measured over a performance period of up to 10 years and annual incentive awards (a type of performance award) will generally be paid within 90 days following the applicable year end.
Share-based Awards: Restricted Stock Units
During 2018, 2017 and 2016, the Company granted 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 components and are subject to satisfaction of certain predetermined performance criteria.
As of December 31, 2018, there were 11,852,592 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, net of withholding tax. The Company has the option following vesting to settle RSUs in stock or cash, or a combination of stock and cash. During 2018, shares of common stock were used to settle all vested RSUs. During 2017, cash was used to settle vested RSUs related to the retirement of an executive officer and shares of common stock were used to settle all other vested RSUs. The Company expects to settle RSUs that vest in the future using shares of common stock.
RSUs currently outstanding relate to the 2018 and 2017 grants, which were 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.
During 2018, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) net income before income tax expense, net interest expense, depreciation, depletion, amortization, accretion and certain other items (“Adjusted EBITDA”) for 2018 and (ii) Adjusted EBITDA as a percent of total revenue (“Adjusted EBITDA Margin”) for 2018. Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels. For 2018, the Company achieved target for both Adjusted EBITDA and Adjusted EBITDA Margin.
During 2017, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) Adjusted EBITDA for 2017 and (ii) Adjusted EBITDA Margin for 2017. Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels. For 2017, the Company achieved target for both Adjusted EBITDA and Adjusted EBITDA Margin.
During 2016, RSUs granted were subject to adjustments based on achievement of a combination of performance criteria, which was comprised of: (i) Adjusted EBITDA for 2016 and (ii) Adjusted EBITDA Margin for 2016. Adjustments range from 0% to 100% based upon actual results compared against pre-defined performance levels. For 2016, the Company was below target for Adjusted EBITDA and achieved target for Adjusted EBITDA Margin.
A summary of activity related to RSUs is as follows:
Subject to the satisfaction of service conditions, the RSUs outstanding as of December 31, 2018 are eligible to vest in the year indicated in the table below:
RSUs fair value at grant date - During 2018, 2017 and 2016, the grant date fair value of RSUs granted was $6.8 million, $5.9 million and $9.3 million, respectively.
RSUs fair value at vested date - The fair value of the RSUs that vested during 2018, 2017 and 2016 was $11.0 million, $5.5 million and $2.4 million, respectively, based on the Company’s closing price on the vesting date.
Share-Based Awards: Restricted Stock
Under the Directors Compensation Plan, shares of restricted stock (“Restricted Shares”) were issued in 2018, 2017 and 2016 to the Company’s non-employee directors as a component of their compensation arrangement. Vesting occurs upon completion of the specified vesting period and one-third of each grant vests each year over a three-year period. The holders of Restricted Shares generally have the same rights as a shareholder of the Company with respect to such shares, including the right to vote and receive dividends or other distributions paid with respect to the shares. Restricted Shares are subject to forfeiture until vested and cannot be sold, transferred or otherwise disposed of during the restriction period.
As of December 31, 2018, there were 128,980 shares of common stock available for issuance in satisfaction of awards under the Directors Compensation Plan. Reductions in shares available are made when Restricted Shares are granted.
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, 2018 are expected to vest as follows:
Restricted stock fair value at grant date - The grant date fair value of restricted stock granted during 2018, 2017 and 2016 was $0.3 million each year for all years presented based on the Company’s closing price on the date of grant.
Restricted stock fair value at vested date - The fair value of the restricted stock that vested during 2018, 2017 and 2016 was $0.7 million, $0.1 million and $0.1 million, respectively, based on the Company’s closing price on the date of vesting.
A summary of compensation expense under share-based payment arrangements and the related tax benefit is as follows (in thousands):
As of December 31, 2018, unrecognized share-based compensation expense related to our awards of RSUs and Restricted Shares was $6.4 million and $0.4 million, respectively. Unrecognized compensation expense will be recognized through November 2020 for our RSUs and April 2021 for our Restricted Shares.
In addition to share-based compensation, cash-based awards were granted under the Plan to substantially all eligible employees in 2018, 2017 and 2016. The cash-based awards, which are a short-term component of the Plan, 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. In addition, these cash-based awards included an additional financial condition requiring Adjusted EBITDA less reported Interest Expense Incurred for any fiscal quarter plus the three preceding quarters to exceed defined levels measured over defined time periods for each cash-based award. Expense is recognized over the service period once the business criteria, individual performance criteria and financial condition are met.
Share-Based Awards and Cash-Based Awards Compensation Expense
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