XML 31 R19.htm IDEA: XBRL DOCUMENT
v3.19.2

EQUITY-BASED COMPENSATION | 6 Months Ended
--- | ---
Jun. 30, 2019
EQUITY-BASED COMPENSATION |
EQUITYBASED COMPENSATION | NOTE 11—EQUITY-BASED COMPENSATION The SES Holdings 2011 Equity Incentive Plan, (“2011 Plan”) was approved by the board of managers of SES Holdings in April 2011. In conjunction with the Select 144A Offering, the Company adopted the Select Energy Services, Inc. 2016 Equity Incentive Plan (as amended, the “2016 Plan”) for employees, consultants and directors of the Company and its affiliates. Options that were outstanding under the 2011 Plan immediately prior to the Select 144A Offering were cancelled in exchange for new options granted under the 2016 Plan. On July 18, 2017, the Select Inc. board of directors approved the First Amendment to the 2016 Plan (the “Equity Plan Amendment”), which clarifies the treatment of substitute awards under the 2016 Plan (including substitute awards that may be granted in connection with the Rockwater Merger which occurred on November 1, 2017) and allowed for the assumption by the Company of shares eligible under any pre-existing stockholder-approved plan of an entity acquired by the Company or its affiliate (including the Rockwater Energy Solutions Inc. Amended and Restated 2017 Long Term Incentive Plan (the “Rockwater Equity Plan”)), in each case subject to the listing rules of the stock exchange on which the Company’s Class A Common Stock is listed. The effectiveness of the Equity Plan Amendment was subject to approval by the Company's stockholders and the consummation of the transactions contemplated by the Merger Agreement for the Rockwater Merger. The Company’s consenting stockholders, who held a majority of the outstanding common stock of the Company, approved the Equity Plan Amendment on July 18, 2017. The Equity Plan Amendment became effective on November 1, 2017 upon the consummation of the Rockwater Merger. Currently, the maximum number of shares reserved for issuance under the 2016 Plan, taking into account the impact of the Rockwater Merger, is approximately 9.3 million shares. For all share-based compensation award types, the Company accounts for forfeitures as they occur. Stock option awards Stock options were granted with an exercise price equal to or greater than the fair market value of a share of Class A Common Stock as of the date of grant. Prior to the Company’s initial public offering on April 26, 2017, the Company historically valued Class A Common Stock on a quarterly basis using a market approach that includes a comparison to publicly traded peer companies using earnings multiples based on their market values and a discount for lack of marketability. This fair value measurement relied on Level 3 inputs. The estimated fair value of its stock options is expensed over their vesting period, which is generally three years from the applicable date of grant. However, certain awards granted during the years ended December 31, 2017 and 2016 in exchange for cancelled awards were immediately vested and fully exercisable on the date of grant because they were either granted in exchange for the cancellation of outstanding options granted under the 2011 Plan or the Rockwater Equity Plan, as applicable, that were fully vested and exercisable prior to such cancellation. The Company utilized the Monte Carlo option pricing model to determine fair value of the options granted during 2018, which incorporates assumptions to value equity-based awards. The risk-free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant. The expected life of the options was based on the vesting period and term of the options awarded, which is ten years. ​ A summary of the Company’s stock option activity and related information as of and for the Current Period is as follows: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the six months ended June 30, 2019
​ |  | ​ | ​ | ​ | ​ | ​ | Weighted-average | ​ | ​ | ​
​ | ​ | ​ | ​ | Weighted-average | ​ | Remaining Contractual | ​ | Aggregate Intrinsic
​ | ​ | Stock Options | ​ | Exercise Price | ​ | Term (Years) | ​ | Value (in thousands) (a)
Beginning balance, outstanding |  | 3,865,678 | ​ | $ | 16.00 | ​ | 4.9 | ​ | $ | 19
Granted |  | — | ​ | ​ | — | ​ | ​ | ​ | ​ | ​
Exercised | ​ | — | ​ | ​ | — | ​ | ​ | ​ | ​ | ​
Forfeited |  | (12,459) | ​ | ​ | 17.83 | ​ | ​ | ​ | ​ | ​
Expired | ​ | (27,303) | ​ | ​ | 22.21 | ​ | ​ | ​ | ​ | ​
Ending balance, outstanding |  | 3,825,916 | ​ | $ | 15.95 | ​ | 4.7 | ​ | $ | 2,516
Ending balance, exercisable | ​ | 3,373,046 | ​ | $ | 15.26 | ​ | 4.3 | ​ | $ | 2,189
Nonvested at end of period | ​ | 452,870 | ​ | $ | 21.06 | ​ | ​ | ​ | ​ | ​
(a) Aggregate intrinsic value for stock options is based on the difference between the exercise price of the stock options and the quoted closing Class A Common Stock price of $11.61 and $6.32 as of June 28, 2019 and December 31, 2018, respectively. The Company recognized $1.0 million, $1.4 million, $2.3 million and $2.7 million of compensation expense related to stock options during the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. As of June 30, 2019, there was $2.2 million of unrecognized equity-based compensation expense related to nonvested stock options. This cost is expected to be recognized over a weighted-average period of one year. Restricted Stock Awards and Restricted Stock Units The value of the restricted stock awards and restricted stock units issued was established by the market price of the Class A Common Stock on the date of grant and is recorded as compensation expense ratably over the vesting term, which is generally one to three years from the applicable date of grant. The Company recognized compensation expense of $2.2 million, $1.2 million, $4.0 million and $2.1 million related to the restricted stock awards and restricted stock units for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. As of June 30, 2019, there was $13.6 million of unrecognized compensation expense with a weighted-average remaining life of 1.6 years related to unvested restricted stock awards and restricted stock units. A summary of the Company’s restricted stock awards activity and related information for the Current Period is as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the six months ended June 30, 2019
​ | ​ | ​ | ​ | Weighted-average
​ | ​ | Restricted Stock Awards | ​ | Grant Date Fair Value
Nonvested at December 31, 2018 | ​ | 496,945 | ​ | $ | 19.02
Granted | ​ | 1,373,930 | ​ | ​ | 8.77
Vested | ​ | (255,582) | ​ | ​ | 18.80
Forfeited | ​ | (8,822) | ​ | ​ | 19.79
Nonvested at June 30, 2019 | ​ | 1,606,471 | ​ | $ | 10.28
​ ​ ​ A summary of the Company’s restricted stock unit activity and related information for the Current Period is as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the six months ended June 30, 2019
​ |  | ​ |  | Weighted-average
​ | ​ | Restricted Stock Units | ​ | Grant Date Fair Value
Nonvested at December 31, 2018 |  | 2,500 | ​ | $ | 19.00
Granted |  | — | ​ | ​ | —
Vested |  | (1,250) | ​ | ​ | 19.00
Nonvested at June 30, 2019 |  | 1,250 | ​ | $ | 19.00
​ Performance Share Units (PSUs) During 2018 and 2019, the Company approved grants of performance share units (“PSUs”) that are subject to both performance-based and service-based vesting provisions. The number of shares of Class A Common Stock issued to a recipient upon vesting of the PSU will be calculated based on performance against certain metrics that relate to the Company’s return on asset performance over the January 1, 2018 through December 31, 2020 and January 1, 2019 through December 31, 2021 performance periods, respectively. The target number of shares of Class A Common Stock subject to each PSU is one; however, based on the achievement of performance criteria, the number of shares of Class A Common Stock that may be received in settlement of each PSU can range from zero to 1.75 times the target number. The PSUs become earned at the end of the performance period after the attainment of the performance level has been certified by the compensation committee, which will be no later than June 30, 2021 for the 2018 PSU grants, and June 30, 2022 for the 2019 PSU grants, assuming the minimum performance metrics are achieved. The target PSUs that become earned PSUs during the performance period will be determined in accordance with the following table: ​
​ | ​ | ​
Return on Assets at Performance Period End Date | ​ | Percentage of Target PSUs Earned
Less than 9.6% | ​ | 0%
9.6% | ​ | 50%
12% | ​ | 100%
14.4% | ​ | 175%
​ The grant date fair value of PSUs granted during 2018 was $5.9 million and the grant fair value of PSUs granted during the first half of 2019 was $6.9 million. Compensation expense related to the PSUs is determined by multiplying the number of shares of Class A Common Stock underlying such awards that, based on the Company’s estimate, are probable to vest, by the measurement-date (i.e., the last day of each reporting period date) fair value and recognized using the accelerated attribution method. The Company recognized compensation expense of $0.8 million, $0.4 million, $1.7 million and $0.6 million related to the PSUs for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. As of June 30, 2019, the fair value of outstanding PSUs issued was $11.8 million. The unrecognized compensation cost related to our unvested PSUs is estimated to be $8.6 million and is expected to be recognized over a weighted-average period of 1.8 years as of June 30, 2019. ​ The following table summarizes the information about the performance share units outstanding as of June 30, 2019: ​
​ | ​ | ​
​ | ​ | Performance Share Units
Nonvested as of December 31, 2018 | ​ | 255,364
Target shares granted | ​ | 769,741
Target shares vested | ​ | —
Target shares forfeited | ​ | (9,442)
Target shares outstanding as of June 30, 2019 | ​ | 1,015,663
​ Stock-Settled Incentive Awards Effective May 17, 2018, the Company approved grants of stock-settled incentive awards to certain key employees under the 2016 Equity Incentive Plan that are subject to both market-based and service-based vesting provisions. These awards will vest after a two-year service period and, if earned, settled in shares of Class A Common Stock. The ultimate amount earned is based on the achievement of the market metrics, which is based on the stock price of the Class A Common Stock at the vesting date, for which payout could range from 0% to 200%. Any award not earned on the vesting date is forfeited. The target amount that becomes earned during the performance period will be determined in accordance with the following table: ​
​ | ​ | ​
Stock Price at Vesting Date(1) | ​ | Percentage of Target Amount Earned
Less than $20.00 | ​ | 0%
At least $20.00, but less than $25.00 | ​ | 100%
$25.00 or greater | ​ | 200%
| (1) | The stock price at vesting date equals the greater of (i) the fair market value of a share of the Class A Common Stock on the vesting date, or (ii) the volume weighted average closing price of a share of the Class A Common Stock, as reported on the New York Stock Exchange (“NYSE”), for the 30 trading days preceding the vesting date.
The target amount of stock-settled incentive awards granted was $3.9 million. However, the ultimate settlement of the awards will be in shares of Class A Common Stock with a fair market value equal to the earned amount, which could range from 0% to 200% of the target amount depending on the stock price at vesting date. Compensation expense associated with the stock-settled incentive awards is recognized ratably over the corresponding requisite service period. The fair value of the stock-settled incentive awards was determined using a Monte Carlo option pricing model, similar to the Black-Scholes-Merton model, and adjusted for the specific characteristics of the awards. The key assumptions in the model included price, the expected volatility of our stock, risk-free interest rate based on U.S. Treasury yield curve, cross-correlations between us and our self-determined peer companies’ asset, equity and debt-to-equity volatility. The Company recognized stock compensation expense of $0.1 million, $0.1 million, $0.3 million and $0.1 million related to the stock-settled incentive awards for the Current Quarter, Prior Quarter, Current Period and Prior Period, respectively. The unrecognized compensation cost related to our unvested stock-settled incentive awards is estimated to be $0.5 million and is expected to be recognized over approximately 11 months as of June 30, 2019. ​ The following table summarizes the information about the stock-settled incentive awards outstanding as of June 30, 2019: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | ​ | ​ | ​ | Award Value
​ | ​ | Value at Target | ​ | Being Recognized
Nonvested as of December 31, 2018 | ​ | $ | 3,147 | ​ | $ | 1,202
Granted during 2019 | ​ | ​ | — | ​ | ​ | —
Forfeited during 2019 | ​ | ​ | (210) | ​ | ​ | (80)
Nonvested as of June 30, 2019 | ​ | $ | 2,937 | ​ | $ | 1,122
​ Employee Stock Purchase Plan (ESPP) We have an Employee Stock Purchase Plan (“ESPP”) under which employees that have been continuously employed for at least one year may purchase shares of Class A Common Stock at a discount. The plan provides for four offering periods for purchases: December 1 through February 28, March 1 through May 31, June 1 through August 31 and September 1 through November 30. At the end of each offering period, enrolled employees purchase shares of Class A Common Stock at a price equal to 95% of the market value of the stock on the last day of such offering period. The purchases are made at the end of an offering period with funds accumulated through payroll deductions over the course of the offering period. Subject to limitations set forth in the plan and under IRS regulations, eligible employees may elect to contribute a maximum of $15,000 to the plan in a single calendar year. The plan is deemed to be noncompensatory. The following table summarizes ESPP activity (in thousands, except shares):
​ | ​ | ​ | ​
​ | ​ | For the six months ended June 30, 2019
Cash received for shares issued | ​ | $ | 56
Shares issued | ​ | ​ | 5,667
​ Share-repurchases During the Current Quarter and Current Period, the Company repurchased 0 and 82,092 shares, respectively, of Class A Common Stock in the open market and repurchased 26,716 and 70,410 shares, respectively, of Class A Common Stock in connection with employee minimum tax withholding requirements for units vested under the 2016 Plan. All repurchased shares were retired. This was accounted for as a decrease to paid-in-capital of $1.5 million and a decrease to Class A Common Stock of approximately $1,500.

X
- Definition The entire disclosure for share-based payment arrangement. + 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 + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureOfCompensationRelatedCostsSharebasedPaymentsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration