(8)

STOCK-BASED COMPENSATION AND INCENTIVE PLANS

General

The company’s employee stock option, restricted stock awards, restricted stock units (that settle in Tidewater common stock), and phantom stock plans are long-term retention plans that are intended to attract, retain and provide incentives for talented employees, including officers and non-employee directors, and to align stockholder and employee interests. The company believes its employee restricted stock, stock unit and stock option plans are critical to its operations and productivity. The employee stock option plans allow the company to grant, on a discretionary basis, both incentive and non-qualified stock options as well as restricted stock. The restricted stock and stock unit awards include performance shares.

Under the company’s stock option and restricted stock plans, the Compensation Committee of the Board of Directors has the authority to grant stock options, restricted shares and restricted stock units of the company’s stock to officers and other key employees. Under the terms of the plans, stock options are granted with an exercise price equal to the stock’s closing fair market value on the date of grant.

The number of common stock shares reserved for issuance under the plans and the number of shares available for future grants at March 31, are as follows:

Stock Option Plans

The company has granted stock options to its directors and employees, including officers, under several different stock incentive plans. Generally, options granted vest annually over a three-year vesting period measured from the date of grant. Options not previously exercised expire at the earlier of either three months after termination of the grantee’s employment or ten years after the date of grant. Upon retirement, unvested stock options are forfeited. The retiree has two years post retirement to exercise vested options. All of the stock options are classified as equity awards.

The company uses the Black-Scholes option-pricing model to determine the fair value of options granted and to calculate the share-based compensation expense. Stock options were not granted during fiscal 2014, 2013 or 2012.

The following table sets forth a summary of stock option activity of the company for fiscal years 2014, 2013 and 2012:


	Weighted-average Exercise Price		Number of Shares
Outstanding at March 31, 2011		45.36		1,875,476
Granted (A)		—		—
Exercised		38.71		(146,508	)
Expired or cancelled/forfeited		56.44		(3,544	)
Outstanding at March 31, 2012		44.93		1,725,424
Granted (A)		—		—
Exercised		29.09		(141,542	)
Expired or cancelled/forfeited		52.47		(27,607	)
Outstanding at March 31, 2013		46.24		1,556,275
Granted (A)		—		—
Exercised		36.86		(186,219	)
Expired or cancelled/forfeited		—		—
Outstanding at March 31, 2014		$ 47.51		1,370,056

(A)	Stock options were not granted during fiscal 2014, 2013 and 2012.

Information regarding the 1,370,056 options outstanding and exercisable at March 31, 2014 can be grouped into three general exercise-price ranges as follows:


	Exercise Price Range
At March 31, 2014	$33.83 - $37.55		$45.75 - $48.96		$55.76 - $65.69
Options outstanding and exercisable		371,961		394,514		603,581
Weighted average exercise price		$34.37		$45.86		$56.70
Weighted average remaining contractual life		4.4 years		6.0 years		3.0 years

Additional information regarding stock options for the years ended March 31, are as follows:


(In thousands, except number of stock options and weighted average price)	2014		2013		2012
Intrinsic value of options exercised	$	4,059		2,544		2,800
Number of stock options vested		8,926		144,537		328,325
Fair value of stock options vested	$	115		2,154		4,117
Number of options exercisable		1,370,056		1,547,349		1,561,836
Weighted average exercise price of options exercisable	$	47.51		46.27		44.86
The aggregate intrinsic value of the options outstanding and exercisable at March 31, 2014 was $6.4 million.
Stock option compensation expense along with the reduction effect on basic and diluted earnings per share, and stock option compensation expense for the years ended March 31, are as follows:
(In thousands, except per share data)	2014		2013		2012
Stock option compensation expense	$	12		2,049		3,892
Basic earnings per share reduced by		0.00		0.03		0.05
Diluted earnings per share reduced by		0.00		0.03		0.05

There were no unrecognized stock-option compensation costs as of March 31, 2014. No stock option compensation costs were capitalized as part of the cost of an asset. Compensation costs for stock options that have not yet vested will be recognized as the underlying stock options vest over the appropriate future period. The level of unrecognized stock-option compensation will be affected by any future stock option grants and by the termination of any employee who has received stock options that are unvested as of the employee’s termination date.

Restricted Stock Awards

The company has granted restricted stock awards to key employees, including officers, under several different employee stock plans, which provide for the granting of restricted stock and/or performance awards to officers and key employees. The company awards both time-based and performance-based shares of restricted stock awards. The restrictions on the time-based restricted stock awards lapse generally over a four year period and require no goals to be achieved other than the passage of time and continued employment. The restrictions on the performance-based restricted stock award lapse if the company meets specific targets. During the restricted period, the restricted shares may not be transferred or encumbered, but the recipient has the right to vote the restricted shares and receive dividends on the time-based restricted shares. Dividends are accrued on performance-based restricted shares and ultimately paid only if the performance criteria are achieved. All of the restricted stock awards are classified as equity awards in stockholders’ equity. The value of restricted stock awards is generally amortized on a straight-line basis to earnings over the respective vesting periods and is net of forfeitures.

The following table sets forth a summary of restricted stock award activity of the company for fiscal 2014, 2013 and 2012:


	Weighted-average Grant-Date Fair Value		Time Based Shares			Performance Based Shares
Non-vested balance at March 31, 2011		51.13		369,599			228,624
Granted		54.59		7,500			—
Vested		50.11		(110,681	)		(4,983	)
Cancelled/forfeited		—		—			—
Non-vested balance at March 31, 2012		51.43		266,418			223,641
Granted		—		—			—
Vested		49.53		(110,802	)		—
Cancelled/forfeited		56.84		(7,067	)		(59,503	)
Non-vested balance at March 31, 2013		50.95		148,549			164,138
Granted		55.04		28,963			—
Vested		56.71		(93,739	)		(1,749	)
Cancelled/forfeited		35.76		(4,949	)		(56,123	)
Non-vested balance at March 31, 2014		$ 54.75		78,824			106,266

Restrictions on approximately 49,861 time-based restricted stock awards will lapse during fiscal 2015, and restrictions on 37,861 performance-based restricted stock awards outstanding at March 31, 2014 will lapse during fiscal 2015 if performance-based targets are achieved.

Restricted stock award compensation expense and grant date fair value for the years ended March 31, is as follows:


(In thousands)	2014		2013		2012
Grant date fair value of restricted stock vested	$	4,429		5,488		5,796
Restricted stock compensation expense		4,633		5,987		6,171

As of March 31, 2014, total unrecognized restricted stock compensation costs amounted to $4.8 million, or $3.8 million net of tax. No restricted stock award compensation costs were capitalized as part of the costs of an asset. The amount of unrecognized restricted stock compensation will be affected by any future restricted stock grants and by the separation of an employee from the company who has received restricted stock grants that are unvested as of their separation date. There were no modifications to the restricted stock awards during fiscal 2014, 2013 and 2012.

Restricted Stock Units

The company has granted restricted stock units (RSUs) to key employees, including officers, under the company’s employee stock plan, which provide for the granting of restricted stock units to officers and key employees. The company awards time-based units, where each unit represents the right to receive, at the end of a vesting period, one unrestricted share of Tidewater common stock with no exercise price. The company also awards performance-based RSUs, where each unit represents the right to receive, at the end of a vesting period, up to two shares of Tidewater common stock with no exercise price. Vesting of the various performance-based restricted stock units is based on metrics such as a three year Total Shareholder Return (TSR) as measured against a three year TSR of a defined peer group and Return on Total Capital (ROTC) for the company over a three year performance period. The company uses assumptions underlying the Black-Scholes methodology to produce a Monte Carlo simulation model to value the TSR performance-based restricted stock units. The fair value of the ROTC performance-based RSUs and time-based RSUs is based on the market price of our common stock on the date of grant. The restrictions on the time-based RSUs lapse over a three year period from the date of the award and require no goals to be achieved other than the passage of time and continued employment. The restrictions on the performance-based restricted stock units lapse if the company meets specific targets as defined. During the restricted period, the RSUs may not be transferred or encumbered, but the recipient has the right to receive dividend equivalents on the restricted stock units, but have no voting rights until the units vest. Dividend equivalents are accrued on performance-based restricted shares and ultimately paid only if the performance criteria are achieved. Upon retirement, the Compensation

Committee of the Board of Directors will take into consideration the accelerated vesting of the restricted stock units after certain age and service criteria are met. Restricted stock unit compensation costs are recognized on a straight-line basis over the vesting period, and are net of forfeitures.

The following table sets forth a summary of restricted stock unit activity of the company for fiscal 2014, 2013 and 2012:


	Weighted-average Grant-Date Fair Value		Time Based Units		Weight-average Grant Date Fair Value		Performance Based Units
Non-vested balance at March 31, 2011		$ —		—		—		—
Granted		54.18		248,288		72.23		84,394
Vested		—		—		—		—
Cancelled/forfeited		—		—		—		—
Non-vested balance at March 31, 2012		$54.18		248,288		72.23		84,394
Granted		50.16		259,158		67.11		84,323
Vested		54.17		(79,507)		—		—
Cancelled/forfeited		54.18		(10,274)		72.23		(3,476)
Non-vested balance at March 31, 2013		$51.69		417,665		69.62		165,241
Granted		49.37		265,937		49.34		91,132
Vested		52.22		(175,673)		—		—
Cancelled/forfeited		52.43		(12,720)		—		—
Non-vested balance at March 31, 2014		$ 50.24		495,209		51.06		256,373

Restrictions on approximately 228,207 time-based shares will lapse during fiscal 2015, and no performance-based shares outstanding at March 31, 2014 will vest during fiscal 2015.

Restricted stock unit compensation expense and grant date fair value for the year ended March 31, is as follows:


(In thousands)	2014		2013		2012
Grant date fair value of restricted stock units vested	$	8,684		4,307		—
Restricted stock unit compensation expense		12,664		7,836		272

As of March 31, 2014, total unrecognized restricted stock unit compensation costs amounted to $34.2 million, or $21.7 million net of tax. No restricted stock unit compensation costs were capitalized as part of the costs of an asset. The amount of unrecognized restricted stock unit compensation costs will be affected by any future restricted stock unit grants and by the separation of an employee from the company who has received restricted stock units that are unvested as of their separation date. There were no modifications to the restricted stock units during fiscal 2014, 2013 and 2012.

Phantom Stock Plan

The company provides a Phantom Stock Plan to provide additional incentive compensation to certain key employees who are not officers of the company. The plan awards phantom stock units to participants who have the right to receive the value of a share of common stock in cash from the company. Participants have no voting or other rights as a shareholder with respect to any common stock as a result of participation in the phantom stock plan. The phantom shares generally have a three or four-year vesting period from the grant date of the award provided the employee remains employed by the company during the vesting period. Participants receive dividend equivalents at the same rate as dividends on the company’s common stock.

The following table sets forth a summary of phantom stock activity of the company for fiscal 2014, 2013 and 2012:


	Weighted-average Grant-Date Fair Value		Time Based Shares			Performance Based Shares
Non-vested balance at March 31, 2011		46.08		138,068			28,059
Granted		54.18		22,845			—
Vested		41.61		(51,255	)		—
Cancelled/forfeited		46.16		(6,347	)		—
Non-vested balance at March 31, 2012		49.23		103,311			28,059
Granted		50.76		27,100			—
Vested		43.60		(54,823	)		—
Cancelled/forfeited		54.26		(6,993	)		(28,059	)
Non-vested balance at March 31, 2013		51.74		68,595			—
Granted		48.81		31,736			1,291
Vested		51.45		(35,095	)		—
Cancelled/forfeited		50.93		(4,354	)		—
Non-vested balance at March 31, 2014	$	50.94		60,882			1,291

Restrictions on 30,689 time-based shares will lapse in fiscal 2015. The fair value of the non-vested phantom shares at March 31, 2014 is $48.62 per unit.

Phantom stock compensation expense and grant date fair value for the years ended March 31, are as follows:


(In thousands)	2014		2013		2012
Grant date fair value of phantom stock vested	$	1,806		2,390		3,041
Phantom stock compensation expense		1,706		2,507		3,180
Phantom stock compensation costs capitalized as part of an asset		—		—		—

As of March 31, 2014, total unrecognized phantom stock compensation costs amounted to $3.1 million, or $2.8 million net of tax. The liability for this plan will be adjusted in the future until paid to the participant to reflect the value of the units at the respective quarter end Tidewater stock price.

Non-Employee Board of Directors Deferred Stock Unit Plan

The company provides a Deferred Stock Unit Plan to its non-employee directors. The plan provides that each non-employee director is granted annually a number of stock units having an aggregate value of $115,000 during fiscal 2014 and $100,000 prior to fiscal 2013 on the date of grant. Dividend equivalents are paid on the stock units at the same rate as dividends on the company’s common stock and are re-invested as additional stock units based upon the fair market value of a share of company common stock on the date of payment of the dividend. A stock unit represents the right to receive from the company the equivalent value of one share of company’s common stock in cash. Payment of the value of the stock unit granted from inception of the plan to March 2013 shall be made upon the earlier of the date that is 15 days following the date the participant ceases to be a director for any reason or upon a change of control of the company. For these units, the participant can elect to receive five annual installments or a lump sum. Beginning with deferred stock units granted in fiscal 2014, participants will have the additional option of electing a distribution made upon the earlier of the date that is 15 days following the date the participant ceases to be a director for any reason or upon a change of control of the company or distribution date commencing on an anniversary of the grant date, whichever is earlier. For the units granted in fiscal 2014, the participant can elect to receive annual installments of two to ten years or a lump sum distribution.

The following table sets forth a summary of deferred stock unit activity of the company for fiscal 2014, 2013 and 2012:


	Weighted-average Grant-Date Fair Value		Number Of Units
Balance at March 31, 2011		49.80		92,365
Dividend equivalents reinvested		50.49		1,843
Retirement distribution		—		—
Granted		54.02		20,372
Balance at March 31, 2012		50.56		114,580
Dividend equivalents reinvested		46.73		2,472
Retirement distribution		—		—
Granted		50.48		26,955
Balance at March 31, 2013		50.48		144,007
Dividend equivalents reinvested		53.82		2,492
Retirement distribution		59.65		(26,661	)
Granted		49.47		26,550
Balance at March 31, 2014	$	48.68		146,388

Deferred stock units are fully vested at the time of grant. The liability for this plan will be adjusted in the future until paid to the participant to reflect the value of the units at the respective quarter end Tidewater stock price.

Deferred stock unit compensation expense, which is reflected in general and administrative expenses, for the years ended March 31, are as follows:


(In thousands)	2014		2013		2012
Deferred stock units compensation expense	$	1,737		1,085		700

March 31,
2014

Shares of common stock reserved for issuance under the plans

Shares of common stock available for future grants