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Stock-based Compensation Plans | 12 Months Ended
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Dec. 31, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-based Compensation Plans |
(13) | Stock-based Compensation Plans
Description of the Plans The 2005 Equity Based Compensation Plan (the “2005 Plan”) authorizes the compensation committee of the board of directors to grant, among other things, stock options, SARs, PSUs and restricted stock awards to employees. The 2005 Plan also allows us to provide equity compensation to our non-employee directors. The 2005 Plan was approved by stockholders in May 2005 and replaced our 1999 Stock Option Plan. The number of shares that may be issued under the 2005 Plan is equal to (i) 5.6 million shares plus (ii) the number of shares subject to 1999 Stock Option Plan awards outstanding at May 18, 2005 that subsequently lapse or terminate without the underlying shares being issued plus (iii) subsequent shares approved by the stockholders. After the approval of the 2005 Plan, no new grants have been made from the 1999 Stock Option Plan. In addition, our 2004 Non-Employee Director Stock Option Plan expired at the end of 2014. Any awards previously granted under the 1999 Stock Option Plan or the Director Plan continue to be exercisable in accordance with their original terms and conditions. Stock-Based Awards In 2005, we began granting SARs to reduce the dilutive impact of our equity plans. SARs represent the right to receive a payment equal to the excess of the fair market value of shares of common stock on the date the right is exercised over the value of the stock on the date of grant. All SARs granted will be settled in shares of stock, vest over a three-year period and have a maximum term of five years from the date they are granted. Beginning in 2011, we began granting restricted stock units under our equity-based stock compensation plan. These restricted stock units, which we refer to as restricted stock Equity Awards, vest over a three-year period. The grant date fair value of the Equity Awards is based on the fair market value of our common stock on the date of grant. In 2014, we began granting PSU awards. The number of shares to be issued is determined by our total shareholder return compared to the total shareholder return of a predetermined group of peer companies over the performance period. The PSU awards vest at the end of the three-year performance period. The grant date fair value of the PSU awards is determined using a Monte Carlo simulation and is recognized as stock-based compensation expense over the three-year performance period. All awards granted have been issued at prevailing market prices at the time of grant and the vesting of these shares is based upon an employee’s continued employment with us. The compensation committee also grants restricted stock to certain employees and non-employee directors of the board of directors as part of their compensation. Compensation expense is recognized over the balance of the vesting period, which is typically three years for employee grants and immediate vesting for non-employee directors. All restricted stock awards are issued at prevailing market prices at the time of the grant and the vesting is based upon an employee’s continued employment with us. Prior to vesting, all restricted stock awards have the right to vote such stock (by the trustee) and receive dividends thereon. Upon grant of these restricted shares, which we refer to as restricted stock Liability Awards, the majority of these shares are placed in our deferred compensation plan and, upon vesting, withdrawals are allowed in either cash or in stock. These Liability Awards are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market amount is reported in deferred compensation plan expense in the accompanying consolidated statements of operations. Historically, we have used authorized but unissued shares of stock when restricted stock is granted. However, we also utilize treasury shares when available. Total Stock-Based Compensation Expense Stock-based compensation expense represents amortization of restricted stock, PSUs and SARs grants. The following table details the amount of stock-based compensation that is allocated to functional expense categories for each of the years in the three-year period ended December 31, 2016 (in thousands):
| 2016 |  |  | 2015 |  |  | 2014 |
Direct operating expense | $ | 2,302 |  |  | $ | 2,780 |  |  | $ | 4,208 |
Brokered natural gas and marketing expense |  | 1,725 |  |  |  | 2,132 |  |  |  | 3,523 |
Exploration expense |  | 2,298 |  |  |  | 2,985 |  |  |  | 4,569 |
General and administrative expense |  | 49,293 |  |  |  | 49,687 |  |  |  | 55,382 |
Termination costs |  | — |  |  |  | 217 |  |  |  | 2,999 |
Total | $ | 55,618 |  |  | $ | 57,801 |  |  | $ | 70,681 |
Unlike the other forms of stock-based compensation expense mentioned above, the mark-to-market of the liability related to the vested restricted stock held in our deferred compensation plans is directly tied to the change in our stock price and not directly related to the functional expenses and therefore, is not allocated to the functional categories and is reported as deferred compensation plan expense in the accompanying consolidated statements of operations. Stock-based compensation expense in the year ended December 31, 2014 includes $6.7 million of awards granted to our former executive chairman for his 2013 service while he was a Range officer, which were fully vested upon grant. In 2016, we recorded $5.7 million additional tax expense for the tax effect of excess financial accounting expense over the corporate income tax deduction for equity compensation vested during 2016. In 2015, the tax deduction for stock-based compensation was less than the book stock-based compensation expense for equity compensation grants vested or exercised during the year. The tax effect of the deduction was recorded as a reduction to additional paid-in capital. For the year ended December 31, 2014, tax benefits realized for deductions that were in excess of the stock-based compensation expense were not recognized due to our net operating loss position. Performance Share Unit Awards The following is a summary of our non-vested PSU award activities:
|  | Number of Units (a) |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2013 |  |  | — |  |  |  | — |
Granted |  |  | 227,929 |  |  | $ | 86.14 |
Vested (b) |  |  | (92,077 | ) |  |  | 86.23 |
Forfeited |  |  | (1,511 | ) |  |  | 82.60 |
Outstanding at December 31, 2014 |  |  | 134,341 |  |  |  | 86.11 |
Granted |  |  | 276,204 |  |  |  | 56.78 |
Vested (c) |  |  | (143,094 | ) |  |  | 68.73 |
Forfeited |  |  | (5,327 | ) |  |  | 82.60 |
Outstanding at December 31, 2015 |  |  | 262,124 |  |  |  | 64.77 |
Granted |  |  | 413,959 |  |  |  | 36.64 |
Vested (c) |  |  | (237,572 | ) |  |  | 53.07 |
Forfeited |  |  | (42,603 | ) |  |  | 46.09 |
Outstanding at December 31, 2016 |  |  | 395,908 |  |  | $ | 44.39 |
(a) These amounts reflect the number of performance units granted. The actual payout of shares may be between zero percent and 150% of the performance units granted depending on the total shareholder return ranking compared to our peer companies at the vesting date. (b) Primarily represents PSU awards granted to our prior executive chairman for the 2013 calendar year while he was a Range officer. (c) Includes PSU awards of 19,684 that were modified and fully vested effective with the closing of our Oklahoma City Office and the sale of our Virginia and West Virginia assets. The fair value of PSUs is estimated on the date of grant using a Monte Carlo simulation model which utilizes multiple input variables that determine the probability of satisfying the market condition stipulated in the award grant and calculates the fair value of the award. Expected volatilities utilized in the model were estimated using a combination of a historical period consistent with the remaining performance period of three years and option implied volatilities. The risk-free interest rate was based on the United States Treasury rate for a term commensurate with the life of the grant. The following assumptions were used to estimate the fair value of PSUs granted during the years ended December 31, 2016, 2015 and 2014:
|  | Year Ended December 31, 2016 |
|  | 2016 |  |  | 2015 |  |  | 2014 |
Risk-free interest rate |  |  | 0.94 | % |  |  | 1.02 | % |  |  | 0.77 | %
Expected annual volatility |  |  | 49 | % |  |  | 33 | % |  |  | 33 | %
Grant date fair value per unit |  | $ | 36.64 |  |  | $ | 56.78 |  |  | $ | 86.14 |
We recorded PSU compensation expense of $12.4 million in the year ended December 31, 2016 compared to $8.7 million in the year ended December 31, 2015 and $7.9 million in the year ended December 31, 2014. As of December 31, 2016, there was $16.2 million of unrecognized compensation related to PSU awards to be recognized over a weighted average period of 1.8 years. Restricted Stock Awards Equity Awards In 2016, we granted 973,000 restricted stock Equity Awards to employees which generally vest over a three-year period compared to 588,000 in 2015 and 356,000 in 2014. We recorded compensation expense for these awards of $22.8 million in the year ended December 31, 2016 compared to $23.8 million in 2015 and $28.1 million in 2014. As of December 31, 2016, there was $24.7 million of unrecognized compensation related to Equity Awards expected to be recognized over a weighted average period of 1.8 years. Restricted stock Equity Awards are not issued to employees until such time as they are vested and the employees do not have the option to receive cash. Liability Awards In 2016, we granted 540,000 shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $35.92. This grant included 59,000 issued to non-employees directors which vest immediately and 481,000 to employees with vesting generally over a three year period. In 2015, we granted 343,000 shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $55.92. This grant included 48,000 issued to non-employee directors which vest immediately and 295,000 to employees with vesting generally over a three-year period. In 2014, we granted 272,000 shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $87.34. This grant included 64,000 issued to non-employee directors, which vest immediately and 208,000 to employees with vesting generally over a three-year period. We recorded compensation expense for these Liability Awards of $18.6 million in the year ended December 31, 2016 compared to $20.8 million in 2015 and $26.3 million in 2014. As of December 31, 2016, there was $17.7 million of unrecognized compensation related to restricted stock Liability Awards expected to be recognized over a weighted average period of 1.8 years. The majority of all of these awards are held in our deferred compensation plan, are classified as a liability and are remeasured at fair value each reporting period. This mark-to-market is reported as deferred compensation expense in our consolidated statements of operations (see additional discussion below). The proceeds received from the sale of stock held in our deferred compensation plan were $13.1 million in 2016 compared to $8.3 million in 2015 and $16.0 million in 2014. The following is a summary of the status of our non-vested restricted stock outstanding at December 31, 2016:
| Equity Awards |  |  | Liability Awards |
| Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Shares |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2013 |  | 385,063 |  |  | $ | 68.24 |  |  |  | 389,013 |  |  | $ | 71.02 |
Granted |  | 356,194 |  |  |  | 84.87 |  |  |  | 272,052 |  |  |  | 87.34 |
Vested |  | (354,237 | ) |  |  | 72.85 |  |  |  | (356,413 | ) |  |  | 75.52 |
Forfeited |  | (26,605 | ) |  |  | 75.66 |  |  |  | (148 | ) |  |  | 77.35 |
Outstanding at December 31, 2014 |  | 360,415 |  |  |  | 79.60 |  |  |  | 304,504 |  |  |  | 80.33 |
Granted |  | 587,711 |  |  |  | 52.29 |  |  |  | 343,397 |  |  |  | 55.92 |
Vested |  | (480,253 | ) |  |  | 65.21 |  |  |  | (330,870 | ) |  |  | 68.71 |
Forfeited |  | (31,109 | ) |  |  | 64.73 |  |  |  | (8,294 | ) |  |  | 74.22 |
Outstanding at December 31, 2015 |  | 436,764 |  |  |  | 59.74 |  |  |  | 308,737 |  |  |  | 65.80 |
Granted |  | 973,491 |  |  |  | 28.51 |  |  |  | 540,128 |  |  |  | 35.92 |
Vested |  | (525,617 | ) |  |  | 43.83 |  |  |  | (374,328 | ) |  |  | 51.40 |
Forfeited |  | (118,667 | ) |  |  | 42.60 |  |  |  | (49,519 | ) |  |  | 40.33 |
Outstanding at December 31, 2016 |  | 765,971 |  |  | $ | 33.62 |  |  |  | 425,018 |  |  | $ | 43.48 |
Stock Appreciation Right Awards During 2014, we granted SARs to our former executive chairman in conjunction with his retirement from Range as an employee. Information with respect to our SARs activities is summarized below.
| Shares |  |  | Weighted Average Exercise Price |
Outstanding at December 31, 2013 |  | 2,582,074 |  |  | $ | 56.36 |
Granted |  | 1,104 |  |  |  | 81.74 |
Exercised |  | (616,563 | ) |  |  | 45.45 |
Expired/forfeited |  | (66 | ) |  |  | 46.44 |
Outstanding at December 31, 2014 |  | 1,966,549 |  |  |  | 59.80 |
Exercised |  | (427,598 | ) |  |  | 45.67 |
Expired/forfeited |  | (27,974 | ) |  |  | 63.10 |
Outstanding at December 31, 2015 |  | 1,510,977 |  |  |  | 63.73 |
Exercised |  | — |  |  |  | — |
Expired/forfeited |  | (507,377 | ) |  |  | 53.16 |
Outstanding at December 31, 2016 |  | 1,003,600 |  |  | $ | 69.08 |
The following table shows information with respect to SARs outstanding and exercisable at December 31, 2016:
|  | Outstanding |  |  | Exercisable |
Range of Exercise Prices |  | Shares |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Weighted Average Exercise Price |  |  | Shares |  |  | Weighted Average Exercise Price |
$ 40.00–$ 49.99 |  |  | 10,108 |  |  |  | 0.04 |  |  | $ | 49.18 |  |  |  | 10,108 |  |  | $ | 49.18 |
50.00–59.99 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
60.00–69.99 |  |  | 578,064 |  |  |  | 0.36 |  |  |  | 64.23 |  |  |  | 578,064 |  |  |  | 64.23 |
70.00–79.99 |  |  | 413,528 |  |  |  | 1.28 |  |  |  | 76.29 |  |  |  | 413,528 |  |  |  | 76.29 |
80.00–81.15 |  |  | 1,900 |  |  |  | 1.69 |  |  |  | 81.15 |  |  |  | 1,900 |  |  |  | 81.15 |
Total |  |  | 1,003,600 |  |  |  | 0.74 |  |  | $ | 69.08 |  |  |  | 1,003,600 |  |  | $ | 69.08 |
The weighted average grant date fair value of these SARs, based on our Black-Scholes-Merton assumptions, is shown below:
|  | 2014 |
Weighted average exercise price per share |  | $ | 81.74 |
Expected annual dividend yield |  |  | 0.20 | %
Expected life in years |  |  | 4.3 |
Expected volatility |  |  | 33 | %
Risk-free interest rate |  |  | 1.4 | %
Weighted average grant date fair value per share |  | $ | 23.17 |
The expected dividend yield is based on the current annual dividend at the time of grant. The expected life is based on the historical exercise activity. The expected volatility factors are based on a combination of both the historical volatilities of the stock and implied volatility of traded options on our common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods commensurate with the expected terms of the options. The total intrinsic value (the difference in value between exercise and market price at the time of grant) of SARs exercised during the year ended December 31, 2015 was $5.4 million compared to $27.1 million in 2014. There were no SARs exercised in 2016. As of December 31, 2016, there was no aggregate intrinsic value for any of the awards exercisable or awards outstanding. The weighted average remaining contractual life of awards exercisable was less than one year. As of December 31, 2016, the number of fully vested awards and the awards expected to vest was 1.0 million shares. The weighted average exercise price and weighted average remaining contractual life of these awards were $69.08 and 0.7 years. As of December 31, 2016, there was no unrecognized compensation cost related to the awards. 401(k) Plan We maintain a 401(k) benefit plan that allows employees to contribute up to 75% of their salary (subject to Internal Revenue Service limitations) on a pretax basis. We match up to 6% of salary in cash and vesting of those contributions is immediate. In 2016, we contributed $4.7 million to the 401(k) Plan compared to $6.1 million in 2015 and $5.8 million in 2014. Employees have a variety of investment options in the 401(k) benefit plan. Deferred Compensation Plan Our deferred compensation plan gives directors, officers and key employees the ability to defer all or a portion of their salaries and bonuses and invest in Range common stock or make other investments at the individual’s discretion. Range provides a partial matching contribution which vests over three years. The assets of the plans are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our creditors in the event of bankruptcy or insolvency. Our stock held in the Rabbi Trust is treated as a liability award as employees are allowed to take withdrawals from the Rabbi Trust either in cash or in Range stock. The liability for the vested portion of the stock held in the Rabbi Trust is reflected in the deferred compensation liability in the accompanying consolidated balance sheets and is adjusted to fair value each reporting period by a charge or credit to deferred compensation plan expense on our consolidated statements of operations. The assets of the Rabbi Trust, other than our common stock, are invested in marketable securities and reported at their market value in other assets in the accompanying consolidated balance sheets. The deferred compensation liability reflects the vested market value of the marketable securities and Range stock held in the Rabbi Trust. Changes in the market value of the marketable securities and changes in the fair value of the deferred compensation plan liability are charged or credited to deferred compensation plan expense each quarter. We recorded mark-to-market loss of $19.2 million in 2016 compared to a gain of $77.6 million in 2015 and a gain of $74.6 million in 2014. The Rabbi Trust held 2.7 million shares (2.3 million of vested shares) of Range stock at December 31, 2016 compared to 2.8 million (2.5 million of vested shares) at December 31, 2015.

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