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Share-based Compensation | 3 Months Ended
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Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Share-based Compensation | Share-based Compensation 2016 Equity Incentive Plan Awards In 2016, the Company approved the 2016 Equity Incentive Plan, which provides for the issuance of non-qualified stock options to various employees of the Company. The Company records share-based compensation expense on options subject to time-based vesting, and subsequent to the consummation of the IPO, on options subject to vesting based on the achievement of certain investment return thresholds by Apollo. The Company does not expect to issue additional share-based compensation awards under the 2016 Equity Incentive Plan. For the three months ended March 31, 2018 and 2017, share-based compensation expense for awards under the 2016 Equity Incentive Plan were not material. Class B Unit Redemption The Company records share-based compensation expense on certain Class B Unit awards granted to employees by Ultimate Parent (“Class B Units”). The Class B Units have two separate tranches, one of which is subject to time-based vesting (“Class B Unit Service Tranche”) over a five-year period, and the other of which is subject to vesting based upon the achievement of certain investment return thresholds by Apollo (“Class B Unit Performance Tranche”). Prior to the IPO, the Company recorded share-based compensation expense on the Class B Unit Service Tranche, whereas no share-based compensation expense was recorded for the Class B Unit Performance Tranche as the vesting of these awards was not deemed probable. During the first quarter of 2018 and in connection with the IPO, each holder of Class B Units in Ultimate Parent had his or her entire Class B interest in Ultimate Parent redeemed for the number of shares of the Company’s common stock (“Distributed Shares”) that would have been distributed to such holder under the terms of Ultimate Parent’s operating agreement in a hypothetical liquidation on the date of the IPO at the IPO offering price (“Class B Unit Redemption”). All vesting conditions for the Distributed Shares remain the same as the vesting conditions that existed under the terms of the Class B Units. The Distributed Shares also have certain other restrictions pursuant to the terms and conditions of the Company’s Amended and Restated Management Investor Rights Agreement (the “MIRA”). Furthermore, as part of the Class B Unit Redemption, each holder received both vested and unvested Distributed Shares in the same proportion as the vested and unvested Class B Units held immediately prior to the IPO. As a result of the Class B Unit Redemption, holders of Class B Units received a total of 20.6 million shares of the Company’s common stock ( 17.8 million of which were unvested at the time of redemption). Of the Distributed Shares issued upon the Class B Unit Redemption, 50%were subject to the vesting conditions that existed for the Class B Unit Service Tranche (“Distributed Shares Service Tranche”) and 50%were subject to the vesting conditions that existed for the Class B Unit Performance Tranche (“Distributed Shares Performance Tranche”). As of March 31, 2018, there were 7.4 million and 10.3 million unvested and outstanding shares in the Distributed Shares Service Tranche and Performance Tranche, respectively. The Class B Unit Redemption resulted in a modification of the Class B Units. In connection with the modification, the Company utilized a Monte Carlo simulation to estimate the fair value of the Distributed Shares, as well as the derived service period for the Distributed Shares Performance Tranche. Significant assumptions included in the simulation were the risk-free interest rate and the expected volatility of the Company’s stock price. The Company selected a risk-free interest rate of 2.43%, which was based on a five-year U.S. Treasury with a zero-coupon rate. The Company also selected a stock price volatility of 30%, which was implied based upon an average of historical volatilities of publicly traded companies in industries similar to the Company, as the Company does not have sufficient history to use as a basis for actual stock price volatility. Additionally, because holders of Distributed Shares are entitled to receive previously declared accrued dividends once the shares vest, a dividend yield assumption was not included in the simulation. The Class B Unit Redemption resulted in weighted-average fair values of $14.00 and $12.97 for the Distributed Shares Service Tranche and Performance Tranche, respectively. The fair values also incorporate the estimated impact of post-vesting selling restrictions pursuant to the MIRA. During the first quarter of 2018, the Company began recording share-based compensation expense on the Distributed Shares Performance Tranche on a straight-line basis over the derived service period of approximately three years from the IPO date, as the vesting conditions are deemed probable following the consummation of the IPO. For the Distributed Shares Service Tranche, incremental compensation expense to be recorded as a result of the modification was not material. Additionally, the IPO triggered an acceleration of vesting of the unvested shares in the Distributed Shares Service Tranche, which will cause such Distributed Shares to become fully vested six months from the date of the IPO. During the three months ended March 31, 2018, the Company recorded $12 million and $10 million of share-based compensation expense on the Distributed Shares Service Tranche and Performance Tranche, respectively. Top-up Options In January 2018, the Company approved its 2018 Omnibus Incentive Plan (the “2018 Omnibus Incentive Plan”), which became effective upon consummation of the IPO. Under the 2018 Omnibus Incentive Plan, and in connection with the Class B Unit Redemption, the Company granted 12.7 million options to holders of Class B Units (“Top-up Options”). The Top-up Options have an exercise price equal to the initial public offering price per share of the Company’s common stock and a contractual term of ten years from the grant date. Similar to the vesting conditions outlined above for the Distributed Shares, the Top-up Options contain a tranche subject to time-based vesting (“Top-up Options Service Tranche”) and a tranche subject to vesting based upon the achievement of certain investment return thresholds by Apollo (“Top-up Options Performance Tranche”). These vesting conditions are the same vesting conditions as those attributable to the Distributed Shares, including the condition that accelerates vesting of the Top-up Options Service Tranche over a period of six months following the IPO. Additionally, recipients of the Top-Up Options received both vested and unvested Top-up Options in the same proportion as the vested and unvested Class B Units held immediately prior to the IPO and Class B Unit Redemption. Any shares of the Company’s common stock acquired upon exercise of the Top-Up Options will be subject to the terms of the MIRA. The Company used a Monte Carlo simulation to estimate the fair value of the Top-up Options, as well as the derived service period for the Top-up Options Performance Tranche. Significant assumptions included in the simulation were the risk-free interest rate, the expected volatility, and the expected dividend yield. The Company selected a risk-free interest rate of 2.43%, which was based on a five-year U.S. Treasury with a zero-coupon rate. The Company selected a stock price volatility of 30%, which was implied based upon an average of historical volatilities of publicly traded companies in industries similar to the Company, as the Company does not have sufficient history to use as a basis for actual stock price volatility. The Company also assumed a 1% dividend yield. The expected average exercise term was derived based on an average of the outcomes of various scenarios performed under the Monte Carlo simulation. The weighted-average grant date fair values were $5.02 and $5.04 for the Top-up Options Service Tranche and Performance Tranche, respectively, for the three months ended March 31, 2018. The fair values also incorporate the estimated impact of post-vesting selling restrictions pursuant to the MIRA. As of March 31, 2018, there were 4.7 million and 6.4 million unvested and outstanding options in the Top-up Options Service Tranche and Performance Tranche, respectively. For the three months ended March 31, 2018, share-based compensation expense was $18 million and $2 million for the Top-up Options Service Tranche and Performance Tranche, respectively. The Company records share-based compensation expense associated with the Top-up Options Service Tranche on a straight-line basis over the requisite service period of six months from the IPO date. The Company records share-based compensation expense associated with the Top-up Options Performance Tranche on a straight-line basis over the derived service period of approximately three years from the IPO date. Other 2018 Share-Based Compensation Awards During the three months ended March 31, 2018, the Company granted 4.0 million options (“2018 Options”) and 1.1 million restricted stock units (“2018 RSUs”) under the 2018 Omnibus Incentive Plan, both of which will cliff vest over a three-year period. For the 2018 Options, the contractual term is ten years. The Company used a Black-Scholes pricing model to estimate the fair value of the 2018 Options granted in the first quarter of 2018. Significant assumptions included in the model were the risk-free interest rate, the expected volatility, the expected dividend yield, and the expected exercise term. The Company selected a risk-free interest rate of 2.52%, which was based on a six-year US Treasury with a zero-coupon rate. The Company selected a stock price volatility rate of 30%, which was implied based upon an average of historical volatilities of publicly traded companies in industries similar to the Company, as the Company does not have sufficient history to use as a basis for actual stock price volatility. The Company also assumed a 1% dividend yield. The expected average exercise term of 6.5 years was calculated using the simplified method, as the Company does not have sufficient historical exercise data to provide a reasonable basis to estimate future exercise patterns. The grant date fair value of the 2018 Options for the three months ended March 31, 2018 was $4.35. The grant date fair value of the 2018 RSUs was equal to $14.00. The Company records share-based compensation expense associated with the 2018 RSUs and 2018 Options on a straight-line basis over the requisite service period. For the three months ended March 31, 2018 and 2017, share-based compensation expense for the options and RSUs granted under the 2018 Omnibus plan were not material. As of March 31, 2018, there were 1.1 million unvested 2018 RSUs outstanding and 4.0 million 2018 Options unvested and outstanding. For all share-based compensation awards, the Company recognizes forfeitures as they occur. Share-based compensation expense is included in selling, general and administrative expenses in the Condensed Consolidated Statements of Operations, and was $49 million and $2 million for the three months ended March 31, 2018 and 2017, respectively.

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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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