10. Stock-Based Compensation

Restricted Stock Units

In connection with the IPO, the Company adopted the Spark Energy, Inc. Long-Term Incentive Plan for the employees, consultants and directors of the Company and its affiliates who perform services for the Company. The Long-Term Incentive Plan was amended and restated on September 1, 2016 (as amended and restated, the "LTIP"). The purpose of the LTIP is to provide a means to attract and retain individuals to serve as directors, employees and consultants who provide services to the Company by affording such individuals a means to acquire and maintain ownership of awards, the value of which is tied to the performance of the Company’s Class A common stock. The LTIP provides for grants of cash payments, stock options, stock appreciation rights, restricted stock or units, bonus stock, dividend equivalents, and other stock-based awards with the total number of shares of stock available for issuance under the LTIP not to exceed 1,375,000 shares.

Periodically the Company grants restricted stock units to our officers, employees, non-employee directors and certain employees of our affiliates who perform services for the Company. The restricted stock unit awards vest over approximately one year for non-employee directors and ratably over approximately three or four years for officers, employees, and employees of affiliates, with the initial vesting date occurring in May of the subsequent year. Each restricted stock unit is entitled to receive a dividend equivalent when dividends are declared and distributed to shareholders of Class A common stock. These dividend equivalents shall be retained by the Company, reinvested in additional restricted stock units effective as of the record date of such dividends and vested upon the same schedule as the underlying restricted stock unit.

In accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”), the Company measures the cost of awards classified as equity awards based on the grant date fair value of the award, and the Company measures the cost of awards classified as liability awards at the fair value of the award at each reporting period. The Company has utilized an estimated 6% annual forfeiture rate of restricted stock units in determining the fair value for all awards excluding those issued to executive level recipients and non-employee directors, for which no forfeitures are estimated to occur. The Company has elected to recognize related compensation expense on a straight-line basis over the associated vesting periods.

Although the restricted stock units allow for cash settlement of the awards at the sole discretion of management of the Company, management intends to settle the awards by issuing shares of the Company’s Class A common stock.

Total stock-based compensation expense for the years ended December 31, 2016, 2015 and 2014 was $5.2 million, $3.2 million and $0.9 million. Total income tax benefit related to stock-based compensation recognized in net income (loss) was $2.1 million, $1.2 million and $0.3 million for the years ended December 31, 2016, 2015 and 2014.

Equity Classified Restricted Stock Units

Restricted stock units issued to employees and officers of the Company are classified as equity awards. The fair value of the equity classified restricted stock units is based on the Company’s Class A common stock price as of the grant date. The Company recognized stock based compensation expense of $2.3 million, $2.2 million and $0.5 million for the years ended December 31, 2016, 2015 and 2014, respectively, in general and administrative expense with a corresponding increase to additional paid in capital.

The following table summarizes equity classified restricted stock unit activity and unvested restricted stock units for the year ended December 31, 2016:



	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value
Unvested at December 31, 2015	285		$	16.33
Granted	153		29.77
Dividend reinvestment issuances	13		26.84
Vested	(115	)	27.66
Forfeited	(73	)	18.47
Unvested at December 31, 2016	263		$	19.13

For the year ended December 31, 2016, 115,271 restricted stock units vested, with 81,864 shares of common stock distributed to the holders of these units and 33,407 shares of common stock withheld by the Company to cover taxes owed on the vesting of such units.

As of December 31, 2016, there was $4.7 million of total unrecognized compensation cost related to the Company’s equity classified restricted stock units, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Liability Classified Restricted Stock Units

Restricted stock units issued to non-employee directors of the Company and employees of certain of our affiliates are classified as liability awards in accordance with ASC 718 as the awards are either to a) non-employee directors that allow for the recipient to choose net settlement for the amount of withholding taxes dues upon vesting or b) to employees of certain affiliates of the Company and are therefore not deemed to be employees of the Company. The fair value of the liability classified restricted stock units is based on the Company’s Class A common stock price as of the reported period ending date. The Company recognized stock based compensation expense of $3.0 million and $1.0 million and $0.3 million for years ended December 31, 2016, 2015 and 2014, respectively, in general and administrative expense with a corresponding increase to liabilities. As of December 31, 2016, the Company’s liabilities related to these restricted stock units recorded in current liabilities was $1.5 million. As of December 31, 2015, the Company's liabilities related to these restricted stock units recorded in current liabilities was $0.7 million.

The following table summarizes liability classified restricted stock unit activity and unvested restricted stock units for the year ended December 31, 2016:



	Number of Shares (in thousands)		Weighted Average Reporting Date Fair Value
Unvested at December 31, 2015	100		$	20.72
Granted	106		30.30
Dividend reinvestment issuances	7		30.30
Vested	(82	)	27.18
Forfeited	(5	)	30.30
Unvested at December 31, 2016	126		$	30.30

For the year ended December 31, 2016, 82,257 restricted stock units vested, with 71,072 shares of common stock distributed to the holders of these units and 11,185 shares of common stock withheld by the Company to cover taxes owed on the vesting of such units.

As of December 31, 2016, there was $2.0 million of total unrecognized compensation cost related to the Company’s liability classified restricted stock units, which is expected to be recognized over a weighted average period of approximately 1.9 years.