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Stock-based Compensation Plans | 12 Months Ended
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Dec. 31, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-based Compensation Plans |
(12) | Stock-Based Compensation Plans
Description of the Plans We have two active equity-based stock plans, our 2005 Equity Based Compensation Plan, which we refer to as the 2005 Plan and the new 2019 Equity-Based Compensation Plan, which was approved by our stockholders in May 2019. Under these plans, the compensation committee of the board of directors may grant, among other things, stock options, SARs, PSUs and restricted stock awards to non-employee directors and employees. Shares issued as a result of awards granted are generally new common shares but can be funded out of treasury shares, if available. 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, 2019 (in thousands):
| 2019 |  |  | 2018 |  |  | 2017(1) |  |
Direct operating expense | $ | 1,928 |  |  | $ | 2,109 |  |  | $ | 2,060 |
Brokered natural gas and marketing expense |  | 1,856 |  |  |  | 1,452 |  |  |  | 1,437 |
Exploration expense |  | 1,566 |  |  |  | 1,921 |  |  |  | 2,742 |
General and administrative expense |  | 35,061 |  |  |  | 43,806 |  |  |  | 74,873 |
Termination costs |  | 1,971 |  |  |  | — |  |  |  | 1,664 |
Total | $ | 42,382 |  |  | $ | 49,288 |  |  | $ | 82,776 |
| (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. Effective October 2018, officers who qualify for the new post-retirement health care plan are required to provide reasonable notice of retirement and, beginning in 2019, are fully vested after one year of service after grant date. 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 2019, we recorded $3.4 million additional tax expense for the tax effect of excess financial accounting expense over the corporate income tax deduction for equity compensation vested in the year compared to $3.6 million in 2018 and $5.3 million in 2017. Stock-Based Awards Restricted Stock Awards. We grant restricted stock units under our equity-based stock compensation plans. These restricted stock units, which we refer to as restricted stock Equity Awards, generally vest over a three-year period and are contingent on the recipient’s continued employment. These awards are net settled by withholding shares to satisfy income tax withholding payments due upon vesting. The remaining shares are remitted to individual brokerage accounts. 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. Shares to be delivered upon vesting are made available from authorized but unissued shares or shares held as treasury stock. 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 may utilize treasury shares when available. Stock-Based Performance Units. We grant three types of performance share awards: two of which are 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 200% based on the performance achieved and (2) the value of our common stock on the date vesting 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 is a three-year period. Restricted Stock – Equity Awards In 2019, we granted 2.8 million restricted stock Equity Awards to employees which generally vest over a three-year period compared to 1.8 million in 2018 and 888,000 in 2017. We recorded compensation expense for these awards of $22.5 million in the year ended December 31, 2019 compared to $24.2 million in 2018 and $23.4 million in 2017. As of December 31, 2019, there was $24.9 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 2019, we granted 1.2 million shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $10.16. These grants included 183,000 shares issued to non-employee directors, which vest immediately, and 1.0 million shares to employees with vesting generally over a three-year period. In 2018, we granted 891,000 shares of restricted stock Liability Awards as compensation to directors and employees at an average price of $15.30. This grant included 146,000 issued to non-employee directors, which vest immediately, and 745,000 shares to employees with vesting generally over a three-year period. 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. These grants included 90,000 shares issued to non-employee directors, which vest immediately, and 453,000 shares to employees with vesting generally over a three-year period. We recorded compensation expense for these Liability Awards of $9.3 million in the year ended December 31, 2019 compared to $11.7 million in 2018 and $30.4 million in 2017. Accelerated vesting compensation expense of $15.4 million is included in the year ended December 31, 2017. As of December 31, 2019, there was $4.5 million of unrecognized compensation related to restricted stock Liability Awards expected to be recognized over a weighted average period of 1.5 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 $667,000 in 2019 compared to $9.7 million in 2018 and $4.5 million in 2017. The following is a summary of the status of our non-vested restricted stock outstanding at December 31, 2019:
| 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, 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 |
Granted |  | 1,834,883 |  |  |  | 16.98 |  |  |  | 891,350 |  |  |  | 15.30 |
Vested |  | (1,037,501 | ) |  |  | 23.57 |  |  |  | (738,073 | ) |  |  | 16.34 |
Forfeited |  | (244,352 | ) |  |  | 21.59 |  |  |  | (23,900 | ) |  |  | 19.76 |
Outstanding at December 31, 2018 |  | 1,386,088 |  |  |  | 20.04 |  |  |  | 184,579 |  |  |  | 15.65 |
Granted |  | 2,792,438 |  |  |  | 10.59 |  |  |  | 1,214,038 |  |  |  | 10.16 |
Vested |  | (1,608,075 | ) |  |  | 15.72 |  |  |  | (987,491 | ) |  |  | 10.86 |
Forfeited |  | (568,212 | ) |  |  | 13.03 |  |  |  | — |  |  |  | — |
Outstanding at December 31, 2019 |  | 2,002,239 |  |  | $ | 12.32 |  |  |  | 411,126 |  |  | $ | 10.94 |
Stock-B ased 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 that portion is considered forfeited. The following is a summary of our non-vested PG/RG-PSUs awards outstanding at December 31, 2019:
| Number of Units |  |  |  | Weighted Average Grant Date Fair Value of Range Stock |
Outstanding at December 31, 2016 |  | — |  |  | $ | — |
Units granted |  | 122,921 |  |  |  | 25.53 |
Outstanding at December 31, 2017 |  | 122,921 |  |  |  | 25.53 |
Units granted (a) |  | 440,938 |  |  |  | 15.22 |
Forfeited (b) |  | (27,061 | ) |  |  | 23.03 |
Outstanding at December 31, 2018 |  | 536,798 |  |  |  | 15.61 |
Units granted (a) |  | 345,202 |  |  |  | 10.32 |
Forfeited |  | (427 | ) |  |  | 15.65 |
Outstanding at December 31, 2019 |  | 881,573 |  |  | $ | 11.70 |
(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 was forfeited as the performance metric was not met. We recorded PG/RG-RSUs compensation expense of $3.8 million in the year ended December 31, 2019 compared to $5.4 million in the year ended December 31, 2018 and $1.8 million in the year ended December 31, 2017. Accelerated vesting compensation expense of $1.5 million is included in the year ended December 31, 2017. As of December 31, 2019, there was $933,000 of unrecognized compensation related these PSU awards to be recognized over a weighted average period of 1.0 years. 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 the TSR-PSUs granted during the years ended December 31, 2019, 2018 and 2017:
|  | Year Ended December 31, 2019 |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Risk-free interest rate |  |  | 2.44 | % |  |  | 2.42 | % |  |  | 1.49 | %
Expected annual volatility |  |  | 46 | % |  |  | 48 | % |  |  | 44 | %
Grant date fair value per unit |  | $ | 11.34 |  |  | $ | 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, 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 |
Granted (a) |  |  | 329,486 |  |  |  | 18.51 |
Vested and issued (c) |  |  | (73,985 | ) |  |  | 56.81 |
Forfeited |  |  | (197,457 | ) |  |  | 55.46 |
Outstanding at December 31, 2018 |  |  | 1,067,886 |  |  |  | 27.81 |
Granted (a) |  |  | 314,152 |  |  |  | 11.34 |
Vested and issued (d) |  |  | (12,283 | ) |  |  | 30.47 |
Forfeited |  |  | (376,303 | ) |  |  | 37.25 |
Outstanding at December 31, 2019 |  |  | 993,452 |  |  | $ | 19.00 |
(a) These amounts reflect the number of performance units granted. The actual payout of shares may be between zero and 150% (for TSR-PSUs granted in 2017) and may be between zero and 200% (for TSR-PSUs granted in 2018 and 2019) 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. (c) 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 the 36th percentile for the May 2015 grant. The remaining 2015 awards are considered to be forfeited. (d) Includes 12,283 TSR-PSUs awards issued related to 2016 performance where the return on our common stock was in the 20th percentile for the February 2016 grant. The remaining February 2016 awards are considered to be forfeited. The May 2016 awards were 100% forfeited as the performance was not achieved. We recorded TSR-PSU compensation expense of $3.0 million in the year ended December 31, 2019 compared to $6.3 million in the year ended December 31, 2018 and $24.8 million in the year ended December 31, 2017. Accelerated vesting compensation expense of $13.0 million is included in the year ended December 31, 2017. As of December 31, 2019, there was $1.5 million of unrecognized compensation related to these PSU awards to be recognized over a weighted average period of 1.2 years. 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 2019, we contributed $5.4 million to the 401(k) Plan compared to $5.8 million in 2018 and $5.1 million in 2017. 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 $15.5 million in 2019 compared to $18.6 million in 2018 and $50.9 million in 2017. The Rabbi Trust held 3.2 million shares (2.7 million of vested shares) of Range stock at December 31, 2019 compared to 2.6 million (2.4 million of vested shares) at December 31, 2018. 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 on the date they become eligible for Medicare, subject to various cost-sharing features. The change in our post-retirement benefit obligation is as follows (in thousands):
Change in Benefit Obligation: |  | 2019 |  |  | 2018 |
Benefit obligation at beginning of year |  | $ | 1,355 |  |  | $ | 1,769 |
Prior service cost |  |  | — |  |  |  | — |
Service cost |  |  | 88 |  |  |  | 94 |
Interest cost |  |  | 68 |  |  |  | 58 |
Actuarial loss (gain) |  |  | 532 |  |  |  | (526 | )
Benefits paid |  |  | (86 | ) |  |  | (40 | )
Benefit obligation at end of year |  | $ | 1,957 |  |  | $ | 1,355 |
Amounts recognized in the consolidated balance sheet: |  |  |  |  |  |  |  |
Long-term liabilities |  | $ | 1,957 |  |  | $ | 1,355 |
Components of Net Periodic Post Retirement Benefit Cost: |  |  |  |  |  |  |  |
Service cost |  | $ | 88 |  |  | $ | 94 |
Interest cost |  |  | 68 |  |  |  | 58 |
Amortization of prior service cost |  |  | 369 |  |  |  | 369 |
Net periodic post retirement costs (recognized in general and administrative expense) |  | $ | 525 |  |  | $ | 521 |
Other Changes in Benefit Obligations in Other Comprehensive Income (Loss): |  |  |  |  |  |  |  |
Net loss (gain) |  | $ | 532 |  |  | $ | (526 | )
Prior service cost |  |  | — |  |  |  | — |
Amortization of prior service cost |  |  | (369 | ) |  |  | (369 | )
Total recognized in other comprehensive income (loss) |  | $ | 163 |  |  | $ | (895 | )
Total recognized in net periodic benefit cost and other comprehensive income (loss) |  | $ | 688 |  |  | $ | (374 | )
The following summarizes the assumptions used to determine the benefit obligation at December 31, 2019 and 2018:
|  | December 31, 2019 |  |  |  | December 31, 2018 |
Weighted average assumptions used to determine benefit obligation: |  |  |  |  |  |  |  |  |
Discount rate |  |  | 2.9 | % |  |  |  | 4.0 | %
Assumed weighted average healthcare cost trend rates: |  |  |  |  |  |  |  |  |
Initial healthcare trend rate |  |  | 6.5 | % |  |  |  | 6.5 | %
Ultimate trend rate |  |  | 4.5 | % |  |  |  | 5.0 | %
Year ultimate trend rate reached |  |  | 2023 |  |  |  |  | 2028 |
The expected future benefit payments under our post retirement benefit plan for the next ten years is $1.1 million for the five year period 2020 through 2024 and $433,000 for the five year period 2025 through 2029. The estimated prior service cost that will be amortized from accumulated other comprehensive (loss) income into our statements of operations in 2020 is $369,000.

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