Annual report pursuant to Section 13 and 15(d)

RETIREMENT AND LONG-TERM INCENTIVE PLANS

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RETIREMENT AND LONG-TERM INCENTIVE PLANS
 12 Months Ended
Dec. 31, 2016
Share-based Payments and Retirement Disclosure [Abstract]  
RETIREMENT AND LONG-TERM INCENTIVE PLANS
RETIREMENT AND LONG-TERM INCENTIVE PLANS
401(k) Plan
The Company has a defined contribution plan for all employees that are qualified under Section 401(k) of the Internal Revenue Code. Gulf Island Resources employees are not eligible for the retirement plan. Contributions to the retirement plan by the Company are based on the participants’ contributions, with an additional year-end discretionary contribution determined by the Board of Directors. Effective April 1, 2016, the Company temporarily suspended its matching contribution in response to the downturn in the oil and gas industry. For the years ended December 31, 2016, 2015 and 2014, the Company contributed a total of $670,000, $2.3 million, and $2.6 million, respectively.
Long-Term Incentive Plans
Under our long-term incentive plans, the compensation committee of our Board of Directors may award shares of restricted stock and/or options to eligible participants as the compensation committee determines are warranted. A summary of our long-term incentive plans is as follows:
Long-Term Incentive Plan (approved by our shareholders on February 13, 1997)
•
authorizes the grant of options to purchase an aggregate of 1,000,000 (split adjusted) shares of the Company’s common stock to certain officers, key employees, directors and consultants of the Company chosen by the compensation committee.
•
No individual employee may be granted options to purchase more than an aggregate of 400,000 shares of common stock.

2002 Long-Term Incentive Plan (approved by our shareholders on April 24, 2002, and amended on April 26, 2006).
•
authorizes the grant of awards, including options, to purchase an aggregate of 500,000 shares of the Company’s common stock to certain officers, key employees, directors and consultants of the Company chosen by the compensation committee.
•
no individual employee may be granted options to purchase more than an aggregate of 200,000 shares of common stock.

2011 Stock Incentive Plan (approved by our shareholders on April 28, 2011)
•
authorizes the grant of awards, including options, to purchase an aggregate of 500,000 shares of the Company’s common stock to certain officers, key employees, directors and consultants of the Company chosen by the compensation committee.
•
no individual employee may be granted options to purchase more than an aggregate of 200,000 shares of common stock.

2015 Stock Incentive Plan (approved by our shareholders on April 23,2015)

•
authorizes the grant of awards, including options, to purchase an aggregate of 1,000,000 shares of the Company’s common stock to certain officers, key employees, directors and consultants of the Company chosen by the compensation committee.
•
no individual employee may be granted options to purchase more than an aggregate of 200,000 shares of common stock and no outside director may receive awards that relate to more than 25,000 shares in any fiscal year.

At December 31, 2016, there were approximately 1,123,482 shares in the aggregate remaining available for future issuance under the Long-Term Incentive Plan, the 2002 Long-Term Incentive Plan, the 2011 Stock Incentive Plan and the 2015 Stock Incentive Plan (together, the “Incentive Plans”). The Company issues new shares through its transfer agent upon stock option exercises or restricted share issuances.

Restricted Stock Awards
Awards of restricted stock are subject to transfer restrictions, forfeit provisions and other terms and conditions subject to the provisions of our long-term incentive plans. At the time an award of restricted stock is made, the compensation committee will establish a period of time during which the transfer of the shares of restricted stock shall be restricted and after which the shares of restricted stock shall be vested. Except for the shares of restricted stock that vest based on the attainment of performance goals, the restricted period shall be a minimum of three years, with incremental vesting of portions of the award over the three-year period permitted.
Our long-term incentive plans do not have any limitations on the amount of shares that can be specifically awarded as restricted stock. Restricted stock granted to our non-employee directors have six-month vesting periods. The fair value of restricted stock is determined based on the closing price of the Company’s common stock on the date of the grant.
A summary of our restricted stock awards activity for the years ended December 31, 2016, 2015 and 2014 is presented in the table below.
 
2016
 
2015
 
2014
 
Number
of Shares
 
Weighted-
Average
Grant-Date
Fair Value
Per  Share
 
Number
of Shares
 
Weighted-
Average
Grant-Date
Fair Value
Per  Share
 
Number
of Shares
 
Weighted-
Average
Grant-Date
Fair Value
Per  Share
Restricted shares at the beginning of period
262,964

 
$
18.33

 
107,840

 
$
24.27

 
178,950

 
$
24.00

Granted
259,699

 
8.55

 
215,034

 
16.33

 
6,000

 
23.19

Vested
(114,804
)
 
14.37

 
(41,112
)
 
22.04

 
(45,356
)
 
23.35

Forfeited
(37,294
)
 
15.48

 
(18,798
)
 
21.39

 
(31,754
)
 
23.85

Restricted shares at the end of period
370,565

 
$
12.99

 
262,964

 
$
18.33

 
107,840

 
$
24.27


As of December 31, 2016, there was $2.6 million of total unrecognized compensation cost related to restricted share-based compensation arrangements granted under the Incentive Plans. This cost is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested during the year ended December 31, 2016 was $1.2 million.
Share-based compensation cost that has been charged against income for the Incentive Plans was $2.1 million, $2.7 million and $1.1 million for 2016, 2015 and 2014, respectively. The total income tax benefit recognized in the income statement for share-based compensation arrangements was $0, $0 and $49,000 for 2016, 2015 and 2014, respectively.
Performance share awards

We issue performance share awards to our executives and certain members of management. Performance targets are communicated to employees at the beginning of a performance period and are based upon our total shareholder return compared to an industry peer group as determined by our Board of Directors. There were no performance based share awards for the year ended December 31, 2014. Awards granted during 2015 are based upon a two-year performance period ending December 31, 2016 and payable in shares. The shares vest at the completion of the performance period with compensation expense recognized on a straight line basis. Awards granted during 2016 are based upon a three-year performance period ending in December 31, 2018 and are payable in cash. The fair value of the 2016 awards is calculated each reporting period and compensation expense (including fair value adjustments) are recognized on a straight line basis.

For the years ended December 31, 2016, 2015 and 2014, expense recognized for performance based share compensation was $1.3 million, $1.1 million and $0, respectively. The fair value of the performance based shares granted for the years ended December 31, 2016 and 2015 was $1.6 million and $2.7 million, respectively, as determined using a Monte Carlo simulation model.