Quarterly report pursuant to Section 13 or 15(d)

Share-Based Compensation and Cash-Based Incentive Compensation

v3.5.0.2
Share-Based Compensation and Cash-Based Incentive Compensation
6 Months Ended
Jun. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Share-Based Compensation and Cash-Based Incentive Compensation

7.  Share-Based Compensation and Cash-Based Incentive Compensation

Awards to Employees.  In 2010, the W&T Offshore, Inc. Amended and Restated Incentive Compensation Plan (the “Plan”) was approved by our shareholders, and amendments to the Plan were approved by our shareholders in May 2013 and in May 2016.  The May 2016 amendment increased the number of shares available in the Plan by 3,300,000 shares.  As allowed by the Plan, during 2015 and 2014, the Company granted restricted stock units (“RSUs”) to certain of its employees. During the six months ended June 30, 2016, no RSUs were granted.  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 based on the results of certain predetermined criteria.  In addition to share-based compensation, the Company may grant to its employees cash-based incentive awards, which are a short-term component of the Plan and are typically based on the Company and the employee achieving certain pre-defined performance criteria.

As of June 30, 2016, there were 7,537,208 shares of common stock available for issuance in satisfaction of awards under the Plan.   The shares available for issuance are reduced when RSUs are settled in shares of common stock, net of withholding tax.  Although the Company has the option at vesting to settle RSUs in stock or cash, or a combination of stock and cash, only common stock has been used to settle vested RSUs to date.

RSUs currently outstanding have been adjusted for performance achieved against predetermined criteria for the applicable performance year.  The RSUs outstanding continue to be subject to employment-based criteria and vesting occurs in December of the second year after the grant.  See the second table below for potential 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 2015 and 2014 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.  Dividend equivalents are earned at the same rate as dividends are paid on our common stock, if any, after achieving the specified performance requirements for the RSUs.

A summary of activity in 2016 related to RSUs is as follows:

 

 

Restricted Stock Units

 

 

 

 

 

 

Weighted Average

 

 

 

 

 

 

Grant Date Fair

 

 

Units

 

 

Value Per Unit

 

Nonvested, December 31, 2015

 

3,474,079

 

 

$

7.42

 

Vested

 

(3,400

)

 

 

18.45

 

Forfeited

 

(86,838

)

 

 

7.01

 

Nonvested, June 30, 2016

 

3,383,841

 

 

 

7.42

 

 

For the outstanding RSUs issued to the eligible employees as of June 30, 2016, vesting is expected to occur as follows:  

 

 

Restricted Stock Units

 

2016

 

977,423

 

2017

 

2,406,418

 

Total

 

3,383,841

 

 

Awards to Non-Employee Directors.  Under 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 2016, 2015 and 2014.  As of June 30, 2016, there were 317,896 shares of common stock available for issuance in satisfaction of awards under the Director Compensation Plan.  The shares available are reduced 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.  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 in 2016 related to Restricted Shares is as follows:

 

Restricted Shares

 

 

 

 

 

 

Weighted Average

 

 

 

 

 

 

Grant Date Fair

 

 

Shares

 

 

Value Per Share

 

Nonvested, December 31, 2015

 

78,230

 

 

$

8.95

 

Granted

 

126,128

 

 

 

2.22

 

Vested

 

(43,062

)

 

 

9.75

 

Nonvested, June 30, 2016

 

161,296

 

 

 

3.47

 

 

Restricted Shares fair value at grant date and vested date:  The fair value of Restricted Shares granted during the six months ended June 30, 2016 was $0.3 million based on the Company’s closing price on the date of grant.  The fair value of Restricted Shares that vested during the six months ended June 30, 2016 was $0.1 million based on the Company’s closing price on the date of vesting.  

For the outstanding Restricted Shares issued to the non-employee directors as of June 30, 2016, vesting is expected to occur as follows:

 

Restricted Shares

 

2017

 

62,136

 

2018

 

57,120

 

2019

 

42,040

 

Total

 

161,296

 

 

  Share-Based Compensation.  Share-based compensation expense is recorded in the line General and administrative expenses in the Condensed Statements of Operations.  A summary of incentive compensation expense under share-based payment arrangements and the related tax benefit is as follows (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

June 30,

 

 

June 30,

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Share-based compensation expense from:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock units

$

2,439

 

 

$

2,802

 

 

$

4,888

 

 

$

5,619

 

Restricted Shares

 

146

 

 

 

90

 

 

 

233

 

 

 

183

 

Common shares

 

 

 

 

 

 

 

 

 

 

(94

)

Total

$

2,585

 

 

$

2,892

 

 

$

5,121

 

 

$

5,708

 

Share-based compensation tax benefit:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax benefit computed at the statutory rate

$

904

 

 

$

1,012

 

 

$

1,792

 

 

$

1,998

 

 

Unrecognized Share-Based Compensation.  As of June 30, 2016, unrecognized share-based compensation expense related to our awards of RSUs and Restricted Shares was $7.9 million and $0.5 million, respectively.  Unrecognized share-based compensation expense will be recognized through November 2017 for RSUs and April 2019 for Restricted Shares.

Cash-Based Incentive Compensation. As defined by the Plan, annual incentive awards may be granted to eligible employees and are typically payable in cash.  These awards are performance-based awards consisting of one or more business or individual performance criteria and a targeted level or levels of performance with respect to each such criterion.  Generally, the performance period is the calendar year and determination and payment is made in cash in the first quarter of the following year.  

During 2015, the Company issued cash-based incentive awards for 2015 that, in addition to being performance-based awards related to 2015 criteria, the payment of such awards is contingent on the Company achieving the following financial condition on or before December 31, 2017:  Adjusted EBITDA less Interest Expense, as reported by the Company in its announced Earnings Release with respect to the end of any fiscal quarter plus three preceding quarters, exceeds $300.0 million.  As the Company did not achieve this financial condition up through June 30, 2016, no amounts have been recognized to date related to the 2015 cash-based incentive awards.  During the six months ended June 30, 2016, no cash-based awards have been issued.