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Stock-based Compensation Plans | 9 Months Ended
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Sep. 30, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-based Compensation Plans | (13) STOCK-BASED COMPENSATION PLANS Stock-Based Awards We have one active equity-based stock plan, our Amended and Restated 2005 Equity-Based Incentive Compensation Plan, which we refer to as the 2005 Plan. Under this plan, various awards may be issued to non-employee directors and employees pursuant to decisions of the Compensation Committee, which is composed of only non-employee, independent directors. To better align the timing of senior officer equity awards with our proxy statement filing in 2018, senior officer equity grants were in March 2018 rather than May, as in previous years. Total Stock-Based Compensation Expense Stock-based compensation represents amortization of restricted stock and performance units. Unlike the other forms of stock-based compensation, the mark-to-market adjustment of the liability related to the vested restricted stock held in our deferred compensation plan 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. The following details the allocation of stock-based compensation to functional expense categories (in thousands):
|  | Three Months Ended September 30, |  |  |  | Nine Months Ended September 30, |
| 2018 |  |  |  | 2017 |  |  |  | 2018 |  |  |  | 2017 |
Direct operating expense | $ | 537 |  |  | $ | 517 |  |  | $ | 1,667 |  |  | $ | 1,563 |
Brokered natural gas and marketing expense |  | 403 |  |  |  | 389 |  |  |  | 1,001 |  |  |  | 1,040 |
Exploration expense |  | 405 |  |  |  | 561 |  |  |  | 1,527 |  |  |  | 1,596 |
General and administrative expense |  | 5,607 |  |  |  | 9,959 |  |  |  | 38,332 |  |  |  | 35,156 |
Termination costs |  | — |  |  |  | (31 | ) |  |  | — |  |  |  | 1,665 |
Total stock-based compensation | $ | 6,952 |  |  | $ | 11,395 |  |  | $ | 42,527 |  |  | $ | 41,020 |
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 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 Awards or “TSR-PSUs”). Each unit granted represents 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 200% based on performance achieved and (2) the value of our common stock on the vesting date which is determined by the Compensation Committee. Dividend equivalents may accrue during the performance period and would be paid in stock at the end of the performance period. The performance period for the TSR-PSUs is three years. The performance period for the PG/RG-PSUs is based on annual performance targets earned over a three-year period. SARs. At September 30, 2018, there were 1,104 SARs outstanding. Restricted Stock – Equity Awards In first nine months 2018, we granted 1.8 million restricted stock Equity Awards to employees at an average price of $16.97 which generally vest over a three-year period compared to 883,000 at an average price of $32.81 in first nine months 2017. We recorded compensation expense for these awards of $18.2 million in first nine months 2018 compared to $18.1 million in the same period of 2017. 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 first nine months 2018, we granted 877,000 shares of restricted stock Liability Awards as compensation to employees at an average price of $15.30 which vests generally over a three-year period and 138,000 shares were granted to non-employee directors at an average price of $15.54 with immediate vesting. The timing of equity grants to senior officers was moved to March 2018 to align with our proxy statement filings compared to grants in May in previous years. In first nine months 2017, we granted 451,000 shares of restricted stock Liability Awards as compensation to employees at an average price of $25.95 with vesting generally over a three-year period and 90,000 shares were granted to non-employee directors at an average price of $25.01 with immediate vesting. We recorded compensation expense for these Liability Awards of $11.0 million in first nine months 2018 compared to $12.0 million in first nine months 2017. The majority 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 following is a summary of the status of our non-vested restricted stock outstanding at September 30, 2018:
| 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, 2017 |  | 833,058 |  |  | $ | 31.64 |  |  |  | 55,202 |  |  | $ | 32.26 |
Granted |  | 1,816,432 |  |  |  | 16.97 |  |  |  | 877,191 |  |  |  | 15.30 |
Vested |  | (792,382 | ) |  |  | 23.76 |  |  |  | (733,634 | ) |  |  | 15.99 |
Forfeited |  | (191,332 | ) |  |  | 21.74 |  |  |  | (23,900 | ) |  |  | 19.76 |
Outstanding at September 30, 2018 |  | 1,665,776 |  |  | $ | 20.53 |  |  |  | 174,859 |  |  | $ | 17.14 |
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. 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 September 30, 2018:
| Number of Units |  |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2017 |  | 122,921 |  |  | $ | 18.66 |
Units granted (a) |  | 440,938 |  |  |  | 15.22 |
Forfeited (b) |  | (27,061 | ) |  |  | 23.03 |
Outstanding at September 30, 2018 |  | 536,798 |  |  | $ | 15.61 |
(a) | Amounts granted reflect the number of performance units granted; however, the actual payout of shares will be between zero and 200% depending on achievement of specifically identified performance targets.
(b) | The first of three tranches of PG-PSUs granted in 2017 are considered forfeited as the performance metric was not met.
We recorded PG/RG-PSUs compensation expense of $5.8 million in first nine months 2018 compared to $124,000 in first nine months 2017. 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 first nine months 2018 and 2017:
|  | Nine Months Ended September 30, |  |
|  | 2018 |  |  | 2017 |  |
Risk-free interest rate |  |  | 2.42 | % |  |  | 1.49 | % |
Expected annual volatility |  |  | 48 | % |  |  | 44 | % |
Grant date fair value per unit |  | $ | 18.51 |  |  | $ | 26.26 |  |
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, 2017 |  |  | 1,009,842 |  |  | $ | 38.38 |  |
Units granted (a) |  |  | 329,486 |  |  |  | 18.51 |  |
Vested and issued (b) |  |  | (73,985 | ) |  |  | 56.81 |  |
Forfeited |  |  | (197,457 | ) |  |  | 55.46 |  |
Outstanding at September 30, 2018 |  |  | 1,067,886 |  |  | $ | 27.81 |  |
(a) | These amounts reflect the number of performance units granted. The actual payout of shares may be between zero and 200% of the performance units granted depending on the total shareholder return ranking compared to our peer companies at the vesting date.
(b) | Includes 73,985 TSR-PSUs awards issued related to the 2015 performance period where the return on our common stock was the 46th percentile for the February 2015 grant and 36th percentile for the May 2015 grant. The remaining 2015 awards are considered to be forfeited.
We recorded TSR-PSUs compensation expense of $6.1 million in first nine months 2018 compared to $9.7 million in the same period of 2017. SARs Information with respect to our SARs activities is summarized below.
|  |  | Shares |  | Weighted Average Exercise Price |
Outstanding at December 31, 2017 |  |  | 382,779 |  | $ | 76.54 |
Expired/forfeited |  |  | (381,675 | ) |  | 75.97 |
Outstanding at September 30, 2018 |  |  | 1,104 |  | $ | 81.74 |
Other Postretirement Benefits Effective fourth quarter 2017, as part of our officer succession plan, we implemented a postretirement 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 first nine months 2018, there were $276,000 of estimated prior service costs amortized from accumulated other comprehensive income into general and administrative expense. Those employees that qualify for the new postretirement health care plan are also fully vested in all equity grants. Deferred Compensation Plan Our deferred compensation plan gives non-employee directors and officers the ability to defer all or a portion of their salaries, bonuses or director fees and invest in Range common stock or make other investments at the individual’s discretion. Range provides a partial matching contribution to officers which vests over three years. The assets of the plan are held in a grantor trust, which we refer to as the Rabbi Trust, and are therefore available to satisfy the claims of our general 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 as 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 as 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 $223,000 in third quarter 2018 compared to mark-to-market gain of $9.2 million in third quarter 2017. We recorded mark-to-market gain of $559,000 in first nine months 2018 compared to a mark-to-market gain of $36.8 million in first nine months 2017. The Rabbi Trust held 2.9 million shares (2.7 million of which were vested) of Range stock at September 30, 2018 compared to 2.9 million shares (2.8 million of which were vested) at December 31, 2017.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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