Incentive Compensation Plan
|12 Months Ended|
Dec. 31, 2013
|Incentive Compensation Plan||
10. Incentive Compensation Plan
In 2010, the W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan (the “Plan”) was approved by our shareholders and in 2013, shareholders approved two amendments to the Plan. The Plan covers the Company’s eligible employees and consultants. The Plan amended and restated the Company’s previous Long-term Incentive Compensation Plan (the “Previous Plan”). In addition to other cash and share-based compensation awards, the Plan is designed to grant awards that qualify as performance-based compensation within the meaning of section 162(m) of the IRC. The Plan grants the Compensation Committee of the Board of Directors administrative authority over all participants, and grants the President and Chief Executive Officer 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 performance criteria 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, 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 be paid within 90 days following the applicable year end.
Share-based Awards: Restricted Stock Units
For 2013, 2012 and 2011, performance awards under the Plan were granted in the form of restricted stock units (“RSUs”). As defined by the Plan, RSUs are rights to receive stock, cash or a combination thereof at the end of a specified vesting period, subject to certain terms and conditions as determined by the Committee. RSUs are a long-term compensation component of the Plan, which are granted to only certain employees, and are subject to adjustments at the end of the applicable performance period using a predefined scale based on the Company achieving certain predetermined performance criteria.
During 2013, RSUs granted were subject to 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 2013; (ii) Adjusted EBITDA as a percent of total revenue (“Adjusted EBITDA Margin”) for 2013; and (iii) the Company’s total shareholder return (“TSR”) ranking against peer companies’ TSR for 2013, 2014 and January 1, 2015 to October 31, 2015. TSR is determined based upon the change in the entity’s stock price plus dividends for the applicable performance period. Adjustments range from 0% to 150% for portions subject to Adjusted EBITDA and Adjusted EBITDA Margin measurements and adjustments range from 0% to 200% for the portion subject to TSR measurement. For 2013, the Company exceeded the target for Adjusted EBITDA, was approximately at target for 2013 Adjusted EBITDA Margin and was below target for TSR ranking. Also during 2013, RSUs were granted which were not subject to performance criteria and amounted to less than 3% of total grants.
During 2012, RSUs granted were subject to a combination of performance criteria, which was comprised of: (i) earnings per share (“EPS”) for 2012; and (ii) the Company’s TSR ranking against peer companies’ TSR for 2012, 2013 and January 1, 2014 to October 31, 2014. Adjustments range from 0% to 100% for the portion subject to EPS measurement and adjustments range from 0% to 150% for the portion subject to TSR measurement. Pursuant to the Plan, discretionary authority was exercised for certain non-executive employees, which reduced the forfeitures that would have occurred through application of the pre-defined performance measurement.
During 2011, RSUs granted were subject to single performance criteria, EPS for 2011, and adjustments ranged from 0% to 100%. The Company exceeded the top-tier target; therefore, 100% were deemed eligible for vesting.
All RSUs granted to date are subject to employment-based criteria and vesting occurs in December of the third year after the grant. For example, the RSUs granted during 2011 vested in December 2013 to eligible employees.
For information concerning grants awarded, the determination of fair value for RSUs and amounts recognized in expense, see Note 11.
For 2013, 2012 and 2011, cash-based awards were granted under the Plan to substantially all eligible employees. The cash-based awards, which are a short-term component of the Plan, were determined based on multiple performance measures, such as EPS, reserve and production growth, cost containment and individual performance measures. With respect to the 2013 cash-based awards, most of the performance criteria targets were achieved and were combined with estimates of personal performance measurements to record potential payments. With respect to the 2012 cash-based awards, some of the performance criteria targets were achieved and were combined with the individual’s performance to determine the cash-based award. In addition, pursuant to the Plan, discretionary authority was exercised for certain non-executive employees, which increased cash-based award amounts in 2012. With respect to the 2011 cash-based awards, most of the performance criteria targets were achieved and were combined with the individual’s performance to determine the cash-based award. Eligible employees are paid their cash-based awards within 75 days following year end.
For information concerning amounts recognized in expense, see Note 11.
The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability.
Reference 1: http://www.xbrl.org/2003/role/presentationRef