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Stock-based Compensation Plans | 6 Months Ended
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Jun. 30, 2020
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-based Compensation Plans | (13) STOCK-BASED COMPENSATION PLANS Stock-Based Awards We have two active equity-based stock plans; our Amended and Restated 2005 Equity-Based Incentive Compensation Plan, which we refer to as the 2005 Plan and the Amended and Restated 2019 Equity-Based Compensation Plan, which was approved by our stockholders in May 2019 and amended in May 2020. Under these plans, 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. 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 June 30, |  |  |  | Six Months Ended June 30, |
| 2020 |  |  |  | 2019 |  |  |  | 2020 |  |  |  | 2019 |
Direct operating expense | $ | 434 |  |  | $ | 549 |  |  | $ | 884 |  |  | $ | 1,140 |
Brokered natural gas and marketing expense |  | 168 |  |  |  | 553 |  |  |  | 581 |  |  |  | 1,001 |
Exploration expense |  | 372 |  |  |  | 388 |  |  |  | 702 |  |  |  | 876 |
General and administrative expense |  | 9,179 |  |  |  | 9,500 |  |  |  | 17,208 |  |  |  | 19,138 |
Termination costs |  | — |  |  |  | 26 |  |  |  | — |  |  |  | 26 |
Total stock-based compensation | $ | 10,153 |  |  | $ | 11,016 |  |  | $ | 19,375 |  |  | $ | 22,181 |
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, 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. In May 2020, vesting for non-employee directors was changed to one year after grant date. 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 award recipients 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 can 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 debt-adjusted performance metrics (Production Per Share Awards or “PS-PSUs” and Reserve Per Share Awards or “RS-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 are 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 PS/RS-PSUs is based on annual performance targets earned over a three-year period. Restricted Stock – Equity Awards In first six months 2020, we granted 4.5 million restricted stock Equity Awards to employees at an average grant date fair value of $3.42 which generally vest over a three-year period compared to 2.8 million at an average grant date fair value of $10.59 in first six months 2019. We recorded compensation expense for these outstanding awards of $10.0 million in first six months 2020 compared to $13.6 million in the same period of 2019. 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 six months 2020, we granted 3.3 million shares of restricted stock Liability Awards as compensation to employees at an average grant date fair value of $3.03 which generally vest over a three-year period and 217,000 shares were granted to non-employee directors at an average price of $5.38 with vesting over one year. In first six months 2019, we granted 1.0 million shares of restricted stock Liability Awards as compensation to employees at an average grant date fair value of $10.45 with vesting generally over a three-year period and 157,000 shares were granted to non-employee directors at an average price of $9.50 with immediate vesting. We recorded compensation expense for these Liability Awards of $5.4 million in first six months 2020 compared to $4.6 million in first six months 2019. 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 June 30, 2020:
| 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, 2019 |  | 2,002,239 |  |  | $ | 12.32 |  |  |  | 411,126 |  |  | $ | 10.94 |
Granted |  | 4,462,711 |  |  |  | 3.42 |  |  |  | 3,524,186 |  |  |  | 3.17 |
Vested |  | (809,560 | ) |  |  | 8.90 |  |  |  | (1,428,127 | ) |  |  | 4.33 |
Forfeited |  | (158,961 | ) |  |  | 9.62 |  |  |  | — |  |  |  | — |
Outstanding at June 30, 2020 |  | 5,496,429 |  |  | $ | 5.68 |  |  |  | 2,507,185 |  |  | $ | 3.78 |
Stock-Based Performance Units Production Per Share and Reserve Per Share Awards (debt-adjusted). The PS-PSUs and RS-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, that portion is considered forfeited and there is an adjustment to the expense recorded. The following is a summary of our non-vested PS/RS-PSUs awards outstanding at June 30, 2020:
| Number of Units |  |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2019 |  | 881,573 |  |  | $ | 11.70 |
Units granted (a) |  | 777,847 |  |  |  | 2.33 |
Vested (b) |  | (101,150 | ) |  |  | 15.32 |
Outstanding at June 30, 2020 |  | 1,558,270 |  |  | $ | 4.86 |
(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) | For the PS-PSUs and RS-PSUs awards issued during 2017 the aggregate payout was approximately 150% of target for the March 2017 and May 2017 grants with a positive performance adjustment of 58,591 shares.
We recorded PS/RS-PSUs compensation income of $1.8 million in first six months 2020 compared to expense of $1.7 million in first six months 2019. 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 TSR-PSUs granted during first six months 2020 and 2019:
|  | Six Months Ended June 30, |  |
|  | 2020 |  |  | 2019 |  |
Risk-free interest rate |  |  | 1.4 | % |  |  | 2.4 | % |
Expected annual volatility |  |  | 65 | % |  |  | 46 | % |
Grant date fair value per unit |  | $ | 3.85 |  |  | $ | 11.34 |  |
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, 2019 |  |  | 993,452 |  |  | $ | 19.00 |  |
Units granted (a) |  |  | 610,155 |  |  |  | 3.85 |  |
Vested (b) |  |  | (278,184 | ) |  |  | 26.14 |  |
Forfeited |  |  | (75,899 | ) |  |  | 26.33 |  |
Outstanding at June 30, 2020 |  |  | 1,249,524 |  |  | $ | 9.55 |  |
(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 TSR-PSUs awards issued related to the 2017 performance period where the return on our common stock was in the 60th percentile for the March 2017 grant and the 80th percentile for the May 2017 grant. The remaining 2017 awards are considered to be forfeited.
We recorded TSR-PSUs compensation expense of $1.5 million in first six months 2020 compared to $1.3 million in the same period of 2019. Fair value is amortized over the performance period with no adjustment to the expense recorded for actual targets achieved. Other Post Retirement Benefits Effective fourth quarter 2017, as part of our officer succession plan, 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. There was approximately $90,000 of estimated prior service costs amortized from accumulated other comprehensive income into general and administrative expense in both the three months ended June 30, 2020 and 2019 and approximately $185,000 amortized in both the six months ended June 30, 2020 and 2019. Those employees that qualified for this new retirement health care plan were also fully vested in all equity grants. Effective October 2018, officers who qualify for the plan are required to provide reasonable notice of retirement and beginning in 2019 must provide one year of service after the grant date to be fully vested in an equity grant. 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 a mark-to-market loss of $12.6 million in second quarter 2020 compared to a mark-to-market gain of $11.1 million in second quarter 2019. We recorded a mark-to-market loss of $4.1 million in first six months 2020 compared to a mark-to-market gain of $7.6 million in first six months 2019. The Rabbi Trust held 6.2 million shares (3.8 million of which were vested) of Range stock at June 30, 2020 compared to 3.2 million shares (2.7 million of which were vested) at December 31, 2019.

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