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Stock-based Compensation and Outstanding Awards | 12 Months Ended
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Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock-based Compensation and Outstanding Awards | 16. Stock-based Compensation and Outstanding Awards Under the terms of the NOW Inc. Long Term Incentive Plan (the “Plan”), 16 million shares of the Company’s common stock were authorized for grant to employees, non-employee directors and other persons. The Plan provides for the grant of stock options, restricted stock units and performance stock awards. Stock-based compensation expense recognized for the years ended December 31, 2018, 2017 and 2016 totaled $16 million, $20 million and $23 million, respectively. The tax effected benefit for share-based compensation arrangements was $3 million, $7 million, and $6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Each of the stock-based compensation arrangements are discussed below. Stock Options Stock option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant. Stock option awards generally have either a 7-year or a 10-year contractual term and vest over a 3-year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards. The grant-date fair value of stock options is determined using the Black-Scholes framework. Additionally, the Company’s stock options provide for full vesting of unvested outstanding options, in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. For the stock options granted in 2018, 2017 and 2016, the fair value of each option award was estimated on the date of grant using the Black-Scholes framework that uses the assumptions noted in the table below. The expected volatility was based on the implied volatility on the Company’s stock, historical volatility of the Company’s stock, and the historical volatility of other, similar companies. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant for the period consistent with the expected term. The expected dividends were based on the Company’s history and expectation of dividend payouts. The expected term was based on the average of the vesting period and contractual term.
|  | December 31, |
|  | 2018 |  |  | 2017 |  |  | 2016 |
Valuation Assumptions: |  |  |  |  |  |  |  |  |  |  |  |
Expected volatility |  |  | 44.2 | % |  |  | 37.9 | % |  |  | 44.0 | %
Risk-free interest rate |  |  | 2.7 | % |  |  | 1.9 | % |  |  | 1.3 | %
Expected dividends (per share) |  | $ | — |  |  | $ | — |  |  | $ | — |
Expected term (in years) |  |  | 4.5 |  |  |  | 4.5 |  |  |  | 4.5 |
The following table summarizes award activity for stock options:
Stock Options |  | Shares (in thousands) |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Term (in years) |  |  | Aggregate Intrinsic Value (in millions) |
Outstanding as of December 31, 2017 |  |  | 5,630 |  |  | $ | 25.97 |  |  |  |  |  |  |  |  |
Granted |  |  | 1,807 |  |  |  | 9.90 |  |  |  |  |  |  |  |  |
Forfeited and expired |  |  | (1,915 | ) |  |  | 29.79 |  |  |  |  |  |  |  |  |
Exercised |  |  | (39 | ) |  |  | 13.27 |  |  |  |  |  |  |  |  |
Outstanding as of December 31, 2018 |  |  | 5,483 |  |  | $ | 19.43 |  |  |  | 4.7 |  |  | $ | 3 |
Exercisable at December 31, 2018 |  |  | 2,917 |  |  | $ | 25.37 |  |  |  | 3.8 |  |  | $ | — |
The weighted average grant-date fair value of options granted for the years ended December 31, 2018, 2017 and 2016 was $3.95, $7.07 and $5.29, respectively. The total intrinsic value of options exercised for the years ended December 31, 2018, 2017, and 2016 was less than $1 million. As of December 31, 2018, unrecognized compensation cost related to stock option awards was approximately $7 million, which is expected to be recognized over a weighted average period of 1.7 years. Cash received from exercises of stock options was approximately $1 million for the year ended December 31, 2018. Restricted Stock Awards and Restricted Stock Units (“RSAs and RSUs”) Restricted stock generally cliff vests after 1, 3, 4 or 6 years. The grant-date fair value of restricted stock grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s restricted stock agreements provide for full vesting of restricted stock in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. The following table summarizes award activity for restricted stock awards and restricted stock units:
RSAs / RSUs |  | Shares (in thousands) |  |  | Weighted- Average Grant-Date Fair Value |
Nonvested as of December 31, 2017 |  |  | 1,678 |  |  | $ | 25.99 |
Granted |  |  | 357 |  |  |  | 10.82 |
Vested (1) |  |  | (441 | ) |  |  | 29.02 |
Forfeited |  |  | (79 | ) |  |  | 21.18 |
Nonvested as of December 31, 2018 |  |  | 1,515 |  |  | $ | 21.78 |
| (1) | 113 thousand shares were withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding.
The weighted average grant-date fair value was $10.82, $15.87, and $14.71 for RSAs and RSUs granted for the years ended December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018, unrecognized compensation cost related to RSAs and RSUs was $11 million, which is expected to be recognized over a weighted average period of 1.5 years. The total vest-date fair value of shares vested for the years ended December 31, 2018, 2017, and 2016 was $7 million, $12 million, and $6 million, respectively. Performance Stock Awards (“PSAs”) Performance stock awards generally have a 3-year vesting period from the grant date and vest at the end of the vesting period. The grant-date fair value of market-condition performance stock grants is determined using a Monte Carlo simulation probabilistic model. The grant-date fair value of performance-condition performance stock grants is determined using the closing quoted market price on the grant date. Additionally, the Company’s performance award agreements provide for full vesting of performance awards at the target level in the event of a change of control of the Company and a change in the holder’s responsibilities following a change in control of the Company. For the year ended December 31, 2018, the Company granted PSAs to senior management employees with potential payouts varying from zero to 364,518 shares. The PSAs can be earned over a three-year performance period, based on three equal, independent parts that are subject to three separate performance metrics: (i) one-third of the PSAs have a Total Shareholder Return (TSR) metric (market-condition), (ii) one-third of the PSAs have an EBITDA metric (performance-condition), and (iii) one-third of the PSAs have a Working Capital (WC) metric (performance-condition). Performance against the TSR metric is determined by comparing the performance of the Company’s TSR with the TSR performance of designated peer companies for the three-year performance period. Performance against the EBITDA metric is determined by comparing the performance of the Company’s actual EBITDA average for each of the three-years of the performance period against the EBITDA metrics set by the Company’s Compensation Committee of the Board of Directors. Performance against the WC metric is determined by comparing the performance of the Company’s actual WC average for each of the three-years of the performance period against the WC metrics set by the Company’s Compensation Committee of the Board of Directors. The following table summarizes award activity for performance stock awards:
PSAs |  | Shares (in thousands) |  |  | Weighted- Average Grant-Date Fair Value |  |
Nonvested as of December 31, 2017 |  |  | 317 |  |  | $ | 19.86 |  |
Granted |  |  | 202 |  |  |  | 11.81 |  |
Vested (1) |  |  | (44 | ) |  |  | 22.44 |  |
Forfeited |  |  | (62 | ) |  |  | 23.25 |  |
Nonvested as of December 31, 2018 |  |  | 413 |  |  | $ | 15.13 |  |
| (1) | 14 thousand shares were withheld and retired from the vesting of shares to employees to satisfy minimum tax withholding.
The weighted average grant-date fair value of PSAs granted for the years ended December 31, 2018, 2017 and 2016 was $11.81, $22.75 and $16.47 respectively. As of December 31, 2018, unrecognized compensation cost related to PSAs was $3 million, which is expected to be recognized over a weighted average period of 1.2 years. The total vest-date fair value of PSAs vested during the year ended December 31, 2018 was less than $1 million.

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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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