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Stock-based Compensation Plans | 12 Months Ended
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Dec. 31, 2017
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 the 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. Shares issued as a result of awards granted are generally new common shares. 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 2004 Non-Employee Director Stock Option Plan continue to be exercisable in accordance with their original terms and conditions. Total Stock-Based Compensation Expense Stock-based compensation expense represents amortization of restricted stock and performance units. 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, 2017 (in thousands):
| 2017 (1) |  |  | 2016 |  |  | 2015 |
Direct operating expense | $ | 2,060 |  |  | $ | 2,302 |  |  | $ | 2,780 |
Brokered natural gas and marketing expense |  | 1,437 |  |  |  | 1,725 |  |  |  | 2,132 |
Exploration expense |  | 2,742 |  |  |  | 2,298 |  |  |  | 2,985 |
General and administrative expense |  | 74,873 |  |  |  | 49,293 |  |  |  | 49,687 |
Termination costs |  | 1,664 |  |  |  | — |  |  |  | 217 |
Total | $ | 82,776 |  |  | $ | 55,618 |  |  | $ | 57,801 |
| (1) | Includes $30.8 million accelerated vesting of equity grants.
In fourth quarter 2017, the compensation committee approved a new post-retirement benefit plan (See Other Post Retirement Benefits below). Along with establishing the new health care benefit plan for certain officers that have met the required age and service requirements and with the intention of improving our management succession plan, those officers who qualify for the new post-retirement health care plan were fully vested in all equity grants. The one-time impact of the acceleration of these equity grants was $30.8 million in fourth quarter 2017. 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. Therefore, the liability related to the vested restricted stock held in our deferred compensation plans is not allocated to the functional categories and is reported as deferred compensation plan expense in the accompanying consolidated statements of operations. In 2017, we recorded $5.3 million additional tax expense for the tax effect of excess financial accounting expense over the corporate income tax deduction for equity compensation vested during 2017. 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 2015 deduction was recorded as a reduction to additional paid-in capital. Stock-Based Awards Restricted Stock Awards. We grant restricted stock units under our equity-based stock compensation plan. These restricted stock units, which we refer to as restricted stock Equity Awards, generally vest over a three year period, contingent on the recipient’s continued employment. 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. The compensation committee also grants restricted stock to certain employees and non-employee directors of the board of directors as part of their compensation. We also grant restricted stock to certain employees for retention purposes. 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 generally 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. Stock-Based Performance Units. We grant three types of performance share awards: two based on performance conditions measured against internal performance metrics (Production Growth Awards or “PG-PSUs” and Reserve Growth Awards or “RG-PSUs” and one based on market conditions measured based on Range’s performance relative to a predetermined peer group (TSR Award or “TSR-PSUs”). At grant date, each unit represents the value of one share of our common stock. These units are settled in stock and the amount of the payout is based on (1) the vesting percentage, which can be from zero to 150% based on performance achieved and (2) the value of our common stock on the date vesting is determined by the Compensation Committee. Dividend equivalent may accrue during the performance period and would be paid in stock at the end of the performance period. The performance period is a three year period. SARs. At December 31, 2017, there were 383,000 SARs outstanding. Restricted Stock – Equity Awards In 2017, we granted 888,000 restricted stock Equity Awards to employees which generally vest over a three-year period compared to 973,000 in 2016 and 588,000 in 2015. We recorded compensation expense for these awards of $23.4 million in the year ended December 31, 2017 compared to $22.8 million in 2016 and $23.8 million in 2015. As of December 31, 2017, there was $24.4 million of unrecognized compensation related to Equity Awards expected to be recognized over a weighted average period of 1.7 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. Restricted Stock – Liability Awards In 2017, we granted 543,000 shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $25.91. This grant included 90,000 issued to non-employee directors which vest immediately and 453,000 to employees with vesting generally over a three year period. 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-employee 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. We recorded compensation expense for these Liability Awards of $30.4 million in the year ended December 31, 2017 compared to $18.6 million in 2016 and $20.8 million in 2015. Accelerated vesting compensation expense of $15.4 million is included in the year ended December 31, 2017. As of December 31, 2017, there was $1.7 million of unrecognized compensation related to restricted stock Liability Awards expected to be recognized over a weighted average period of 1.6 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 amount 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 $4.5 million in 2017 compared to $13.1 million in 2016 and $8.3 million in 2015. The following is a summary of the status of our non-vested restricted stock outstanding at December 31, 2017:
| Restricted Stock Equity Awards |  |  | Restricted Stock Liability Awards |
| Shares |  |  | Weighted Average Grant Date Fair Value |  |  | Shares |  |  | Weighted Average Grant Date Fair Value |
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 |
Granted |  | 888,326 |  |  |  | 32.61 |  |  |  | 543,438 |  |  |  | 25.91 |
Vested |  | (698,563 | ) |  |  | 34.82 |  |  |  | (908,912 | ) |  |  | 33.71 |
Forfeited |  | (122,676 | ) |  |  | 32.91 |  |  |  | (4,342 | ) |  |  | 31.10 |
Outstanding at December 31, 2017 |  | 833,058 |  |  | $ | 31.64 |  |  |  | 55,202 |  |  | $ | 32.26 |
Stock-Based Performance Units Production Growth and Reserve Growth Awards. The PG-PSUs and RG-PSUs vest at the end of the three-year performance period. The performance metrics for each year are set by the Compensation Committee no later than March 31 of such year. Based on our probability assessment at December 31, 2017, it is considered not probable that the criteria for the 2017 PG-PSUs will be met but it is considered probable that the criteria for the 2017 RG-PSUs will be met. If the performance metric for the applicable period is not met, then the portion is considered forfeited. The following is a summary of our non-vested PG/RG-PSUs awards outstanding at December 31, 2017:
| Number of Units |  |  |  | Weighted Average Grant Date Fair Value of Range Stock |
Outstanding at December 31, 2016 |  | — |  |  |  | — |
Units granted (a) |  | 122,921 |  |  | $ | 25.53 |
Outstanding at December 30, 2017 |  | 122,921 |  |  | $ | 25.53 |
(a) Amounts granted reflect the number of performance units granted; however, the actual payout of shares will be between zero and 150% depending on achievement of specifically identified performance targets. We recorded PG/RG-PSUs compensation expense of $1.8 million in the year ended December 31, 2017, which includes $1.5 million accelerated vesting compensation expense. TSR Awards. TSR-PSUs granted are earned, or not earned, based on the comparative performance of Range’s common stock measured against a predetermined group of companies in the peer group over a three-year performance period. The fair value of the TSR-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. The fair value is recognized as stock-based compensation expense over the three year performance period. 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, 2017, 2016 and 2015:
|  | Year Ended December 31, 2017 |
|  | 2017 |  |  | 2016 |  |  | 2015 |
Risk-free interest rate |  |  | 1.49 | % |  |  | 0.94 | % |  |  | 1.02 | %
Expected annual volatility |  |  | 44 | % |  |  | 49 | % |  |  | 33 | %
Grant date fair value per unit |  | $ | 26.26 |  |  | $ | 36.64 |  |  | $ | 56.78 |
The following is a summary of our non-vested TSR – PSUs award activities:
|  | Number of Units |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2014 |  |  | 226,418 |  |  | $ | 86.16 |
Granted (a) |  |  | 276,204 |  |  |  | 56.78 |
Forfeited |  |  | (2,679 | ) |  |  | 82.60 |
Outstanding at December 31, 2015 |  |  | 499,943 |  |  |  | 69.95 |
Granted (a) |  |  | 413,959 |  |  |  | 36.64 |
Forfeited |  |  | (42,603 | ) |  |  | 46.09 |
Outstanding at December 31, 2016 |  |  | 871,299 |  |  |  | 55.29 |
Granted (a) |  |  | 358,519 |  |  |  | 26.26 |
Vested and issued (b) |  |  | (85,461 | ) |  |  | 86.23 |
Forfeited |  |  | (134,515 | ) |  |  | 85.24 |
Outstanding at December 31, 2017 |  |  | 1,009,842 |  |  | $ | 38.38 |
(a) These amounts reflect the number of performance units granted. The actual payout of shares may be between zero and 150% of the performance units granted depending on the total shareholder return ranking compared to our peer companies at the vesting date. (b) Includes 85,461 TSR-PSU awards issued related to the 2014 performance period where the return on our common stock was the 67th percentile for the February 2014 grant and 56th percentile for the May 2014 grant. The remaining 2014 awards are considered to be forfeited. We recorded TSR-PSU compensation expense of $24.8 million in the year ended December 31, 2017 compared to $12.4 million in the year ended December 31, 2016 and $8.7 million in the year ended December 31, 2015. Accelerated vesting compensation expense of $13.0 million is included in the year ended December 31, 2017. As of December 31, 2017, there was $1.2 million of unrecognized compensation related to PSU awards to be recognized over a weighted average period of 2.0 years. SARs Information with respect to our SARs activities is summarized below.
| Shares |  |  | Weighted Average Exercise Price |
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 |
Expired/forfeited |  | (507,377 | ) |  |  | 53.16 |
Outstanding at December 31, 2016 |  | 1,003,600 |  |  |  | 69.08 |
Expired/forfeited |  | (620,821 | ) |  |  | 62.29 |
Outstanding at December 31, 2017 |  | 382,779 |  |  | $ | 76.54 |
The following table shows information with respect to SARs outstanding and exercisable at December 31, 2017:
|  | Outstanding |  |  | Exercisable |
Range of Exercise Prices |  | Shares |  |  | Weighted Average Remaining Contractual Life (in years) |  |  | Weighted Average Exercise Price |  |  | Shares |  |  | Weighted Average Exercise Price |
$ 70.00–$ 79.99 |  |  | 380,879 |  |  |  | 0.36 |  |  | $ | 76.51 |  |  |  | 380,879 |  |  | $ | 76.51 |
80.00–81.15 |  |  | 1,900 |  |  |  | 0.69 |  |  |  | 81.15 |  |  |  | 1,900 |  |  |  | 81.15 |
Total |  |  | 382,779 |  |  |  | 0.36 |  |  | $ | 76.54 |  |  |  | 382,779 |  |  | $ | 76.54 |
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. There were no SARs exercised in 2017 or 2016. As of December 31, 2017, 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, 2017, the number of fully vested awards and the awards expected to vest was 383,000 shares. The weighted average exercise price and weighted average remaining contractual life of these awards were $76.54 and 0.4 years. As of December 31, 2017, 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 2017, we contributed $5.1 million to the 401(k) Plan compared to $4.7 million in 2016 and $6.1 million in 2015. 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 gain of $50.9 million in 2017 compared to a loss of $19.2 million in 2016 and a gain of $77.6 million in 2015. The Rabbi Trust held 2.9 million shares (2.8 million of vested shares) of Range stock at December 31, 2017 compared to 2.7 million (2.3 million of vested shares) at December 31, 2016. Other Post Retirement Benefits Effective fourth quarter 2017, we implemented a post-retirement benefit plan to assist in providing health care to officers who are active employees (including their spouses) and have met certain age and service requirements. These benefits are not funded in advance and are provided up to age 65 or at the date they become eligible for Medicare, subject to various cost-sharing features (in thousands).
| December 31, 2017 |
Accumulated benefit obligation | $ | 1,769 |
Change in benefit obligations (recognized in comprehensive income – pretax) |  |  |
Beginning balance at December 31, 2016 | $ | — |
Prior service cost |  | 1,769 |
Total other comprehensive income (loss) at December 31, 2017 | $ | 1,769 |
Amounts recognized in the consolidated balance sheets: |  |  |
Noncurrent liability-accrued benefit cost | $ | 1,769 |
The following summarizes the assumptions used to determine the benefit obligation at December 31, 2017.
| December 31, 2017 |
Weighted average assumptions used to determine benefit obligation: |  |  |
Discount rate |  | 3.3 | %
Assumed weighted average healthcare cost trend rates: |  |  |
Initial healthcare trend rate |  | 7.00 | %
Ultimate trend rate |  | 5.00 | %
Year ultimate trend rate reached |  | 2028 |
The expected future benefit payments under our post-retirement medical plan for the next ten years is $675,000 for the five year period 2018 through 2022 and $638,000 for the five year period 2023 through 2027. The estimated prior service cost that will be amortized from accumulated other comprehensive income into our statement of operations in 2018 is $369,000.

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- Definition 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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