Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

2013 Long-Term Incentive Plan

Under our 2013 Long-Term Incentive Plan (the “LTIP”), stock options, SARs, restricted stock, restricted stock units, dividend equivalent rights and other types of equity and cash incentive awards may be granted to employees, non-employee directors and service providers. The LTIP expires after 10 years, unless prior to that date the maximum number of shares available for issuance under the plan has been issued or our board of directors terminates the plan. There are 20,000,000 shares of common stock reserved for issuance under the LTIP. As of December 31, 2019, 11,410,061 shares remained available for issuance.

Restricted Stock Units

Upon completion of the IPO and pursuant to the LTIP, we began granting restricted stock units. Substantially all RSUs granted under the LTIP vest ratably over a period of one to three years. Our treasury stock consists of shares that were withheld from employees to settle personal tax obligations that arose as a result of restricted stock units that vested. Certain restricted stock unit awards provide for accelerated vesting for qualifying terminations of employment or service.

Employees granted RSUs are not entitled to dividends declared on the underlying shares while the restricted stock unit is unvested. As such, the grant date fair value of the award is measured by reducing the grant date price of our common stock by the present value of the dividends expected to be paid on the underlying shares during the requisite service period, discounted at the appropriate risk-free interest rate. The weighted average grant date fair value of RSUs granted during the years ended December 31, 2019, 2018 and 2017 was $11.4 million, $9.5 million and $12.1 million, respectively. Compensation expense is recognized ratably over the vesting period. Forfeitures are recorded as they occur.

Stock-based compensation expense relating to RSUs for the years ended December 31, 2019, 2018 and 2017 was $8.7 million, $8.9 million and $12.8 million, respectively. The total fair value of RSUs vested during the years ended December 31, 2019, 2018 and 2017 was $7.1 million, $6.7 million and $9.9 million, respectively. Unamortized stock compensation expense as of December 31, 2019 relating to RSUs totaled approximately $8.8 million, which will be expensed over a weighted average period of 1.75 years.

Non-vested RSUs outstanding as of December 31, 2019 and the changes during the year were as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2018	2,188,965		$	7.66
Granted	1,756,125		6.49
Vested	(1,138,654	)	7.87
Forfeited	(345,636	)	6.81
Non-vested at December 31, 2019	2,460,800		$	6.65

Performance Restricted Stock Units

The purpose of the PRSUs is to closely align the incentive compensation of the executive leadership team for the duration of the performance cycle with returns to FINV’s shareholders and thereby further motivate the executive leadership team to create sustained value to FINV shareholders. The design of the PRSU grants effectuates this purpose by placing a

material amount of incentive compensation for each executive at risk by offering an extraordinary reward for the attainment of extraordinary results. Design features of the PRSU grant that in furtherance of this purpose include the following: (1) The vesting of the PRSUs is based on total shareholder return (“TSR”) based on a comparison to the returns of a peer group, which, beginning with PRSUs granted in 2018, is the SPDR S&P Oil & Gas Equipment and Services ETF. (2) TSR is computed over the entire Performance Period (using a 30-day averaging period for the first 30 calendar days and the last 30 calendar days of the Performance Period to mitigate the effect of stock price volatility), but beginning with the PRSUs granted in 2018, TSR performance is calculated separately with respect to three separate one-year achievement periods included in the three-year Performance Period, resulting in a weighted average payout at the end of the three-year Performance Period. The TSR calculation will assume reinvestment of dividends. (3) The ultimate number of shares to be issued pursuant to the PRSU awards will vary in proportion to the actual TSR achieved as a percentile compared to the peer group during the Performance Period as follows: (i) no shares will be issued if the Company’s performance falls below the 25th percentile; (ii) 50% of the Target Level if the Company achieves a rank in the 25th percentile (the threshold level); (iii) 100% of the Target Level if the Company achieves a rank in the 50th percentile (the target level); (iv) 150% of the Target Level if the Company achieves a rank in the 75th percentile (the maximum level for the 2017 grants); and 200% of the Target Level if the Company achieves a rank in the 90th percentile and above (the maximum level for the 2018 and 2019 grants). (4) Unless there is a qualifying termination as defined in the PRSU award agreement, the PRSUs of an executive will be forfeited upon an executive’s termination of employment during the Performance Period.

Though the value of the PRSU grant may change for each participant, the compensation expense recorded by the Company is determined on the date of grant. Expected volatility is based on historical equity volatility of our stock based on 50% of historical and 50% of implied volatility weighting commensurate with the expected term of the PRSU. The expected volatility considers factors such as the historical volatility of our share price and our peer group companies, implied volatility of our share price, length of time our shares have been publicly traded, and split- and dividend-adjusted closing stock prices.

In 2019, we granted PRSUs with a fair value of $3.7 million or 446,858 units (“Target Level”). The performance period for these grants is the three year period from January 1, 2019 to December 31, 2021 (“Performance Period”), but with separate one-year achievement periods from January 1, 2019 to December 31, 2019, January 1, 2020 to December 31, 2020 and January 1, 2021 to December 31, 2021, resulting in a weighted average payout at the end of the Performance Period.

The weighted average assumptions for the PRSUs granted in 2019 are as follows:



	2019
Total expected term (in years)	2.86
Expected volatility	43.5%
Risk-free interest rate	2.48%
Correlation range	2.4% to 88.1%

In 2018, we granted PRSUs with a fair value of $2.0 million or 275,550 units (“Target Level”). The performance period for these grants is the three year period from January 1, 2018 to December 31, 2020 (“Performance Period”), but with separate one-year achievement periods from January 1, 2018 to December 31, 2018, January 1, 2019 to December 31, 2019 and January 1, 2020 to December 31, 2020, resulting in a weighted average payout at the end of the Performance Period.

The weighted average assumptions for the PRSUs granted in 2018 are as follows:



	2018
Expected term (in years)	2.86
Expected volatility	39.0%
Risk-free interest rate	2.35%
Correlation range	11.0% to 85.7%

In 2017, we granted PRSUs with a fair value of $2.6 million or 293,083 units (“Target Level”). The performance period for these grants is a three-year period from January 1, 2017 to December 31, 2019 (“Performance Period”).

The weighted average assumptions for the PRSUs granted in 2017 are as follows:



	2017
Expected term (in years)	2.92
Expected volatility	42.1%
Risk-free interest rate	1.51%
Correlation range	26.8% to 76.0%

In the event of death or disability, the restrictions related to forfeiture as defined in the performance awards agreement will lapse with respect to 100% of the PRSUs at the target level effective on the date of such event. In the event of involuntary termination except for cause, the Company may enter into a special vesting agreement with the executive under which the restrictions for forfeiture will not lapse upon such termination. In the event of a termination for any other reason prior to the end of the Performance Period, all PRSUs will be forfeited.

Stock-based compensation expense related to PRSUs for the years ended December 31, 2019, 2018 and 2017 was $2.0 million, $1.2 million and $0.6 million, respectively. The total fair value of PRSUs vested during the year ended December 31, 2017 was $0.2 million. There were no PRSU vestings during the years ended December 31, 2019 and 2018. Unamortized stock compensation expense as of December 31, 2019 relating to PRSUs totaled approximately $3.0 million, which will be expensed over a weighted average period of 1.82 years.

Non-vested PRSUs outstanding as of December 31, 2019 and the changes during the year were as follows:



	Number of Shares		Weighted Average Grant Date Fair Value
Non-vested at December 31, 2018	593,987		$	8.06
Granted	446,858		8.22
Forfeited	(252,012	)	7.96
Non-vested at December 31, 2019	788,833		$	8.13

Employee Stock Purchase Plan

Under the Frank’s International N.V. ESPP, eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the first day of the option period, or (ii) 85% of the last reported sale price of our common stock on the last trading date immediately preceding the last day of the option period. The ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code. We have reserved 3.0 million shares of our common stock for issuance under the ESPP, of which 2.1 million shares were available for issuance as of December 31, 2019. Shares issued to our employees under the ESPP totaled 389,284 in 2019 and 232,592 shares in 2018. For the years ended December 31, 2019, 2018 and 2017, we recognized $0.6 million, $0.5 million and $0.4 million of compensation expense related to stock purchased under the ESPP, respectively.

In January 2019, we issued 153,451 shares of our common stock to our employees under this plan to satisfy the employee purchase period from July 1, 2018 to December 31, 2018, which increased our common stock outstanding.

In July 2019, we issued 235,833 shares of our common stock to our employees under this plan to satisfy the employee purchase period from January 1, 2019 to June 30, 2019, which increased our common stock outstanding.