Stock-Based Compensation and Other Incentive Plans

Successor Company

Under the Company’s 2016 Omnibus Incentive Plan (the “Incentive Plan”), 3.0 million shares of the Company’s common stock were reserved for awards to officers and other selected key management employees of the Company. The Incentive Plan provides the Board of Directors with the flexibility to grant stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance stock or units, phantom stock awards and rights to acquire stock through purchase under a stock purchase program (“Awards”). Awards the Board of Directors elects to pay out in cash do not impact the shares authorized in the Incentive Plan. Shares available for award under the plan were 2.6 million at December 31, 2016.

Restricted Stock Unit Awards

The Company may issue restricted stock and restricted stock units, which require no payment from the employee. Restricted stock cliff-vests at various dates and restricted stock units either vest ratably over or vest at the end of the award’s stated vesting period. Compensation expense is based on the fair value on the grant date and is recorded ratably over the vesting period utilizing the straight-line recognition method. The employee receives cash compensation equal to the amount of dividends that would have been paid on the underlying shares.

Three restricted stock unit awards were granted in the Successor period: two time based awards vesting over one and three years: and one performance based award vesting over a three year period. The time based awards’ grant date fair value was determined based on the stock price at the date of grant. The performance award’s grant date fair value was determined using a Monte Carlo simulation. A volatility of 58% was selected based on comparator companies, and the three year risk free rate was derived from yields on U.S. Government bonds. Information regarding the restricted stock units activity and weighted average grant-date fair value follows:



	Common Shares	Weighted Average Grant-Date Fair Value
(Shares in thousands)
Outstanding at October 2, 2016	—	—
Granted	384	$	72.00
Forfeited	—	—
Canceled	—	—
Unvested outstanding at December 31, 2016	384	$	72.00

The Company recognized expense related to restricted stock units for the period October 2, 2016 through December 31, 2016 of $1.0 million.

Long-Term Incentive Compensation

The Company has a long-term incentive program that allows for the award of performance units. The total number of units earned by a participant is based on financial and operational performance measures, and may be paid out in cash or in shares of the Company’s common stock. The Company recognizes compensation expense over the three year term of the grant. The liabilities are remeasured quarterly. The Company recognized expense of $1.6 million for the period October 2 through December 31, 2016, $7.2 million for the period January 1 through October 1, 2016, and $7.9 million and $10.1 million for the years ended December 31, 2015 and 2014, respectively. The expense is included primarily in “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

As part of the plan of reorganization, the Company’s Executive Officers agreed to a $6.0 million reduction in scheduled compensation payouts in 2017. The long term incentive compensation liability was reduced $3.7 million as a fresh start accounting adjustment and is reflected in the Successor period ending December 31, 2016 balance. Amounts accrued and unpaid for all grants under the plan totaled $13.9 million and $17.8 million as of December 31, 2016 and 2015, respectively.

Predecessor Company

On the Effective Date, all shares of our old common stock, including any vested and unvested stock options, restricted stock and restricted stock units were canceled.

Common Stock

Stock options are granted at a strike price equal to the closing market price of the Company’s common stock on the date of grant and are generally subject to vesting provisions of a least one year from the date of grant. Compensation expense related to stock options for the period January 1, 2016 through October 1, 2016, and for the years ended 2015 and 2014 were $0.2 million, $1.4 million and $3.2 million, respectively. The majority of the cost relating to the stock-based compensation plans is included in “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.

Restricted stock units

The company may issue restricted stock and restricted stock units, which require no payment from the employee. Restricted stock cliff-vests at various dates and restricted stock units either vest ratably over or vest at the end of three years. Compensation expense is based on the fair value on the grant date and is recorded ratably over the vesting period. Compensation expense related to restricted stock and restricted stock units for the period January 1, 2016 through October 1, 2016, and for the years ended 2015 and 2014 were $1.9 million, $5.9 million and $5.6 million, respectively. The majority of the cost relating to the stock-based compensation plans is included in “Selling, general and administrative expenses” in the accompanying consolidated statements of operations.