Quarterly report pursuant to Section 13 or 15(d)

Equity-Based Compensation

v3.10.0.1
Equity-Based Compensation
6 Months Ended
Jun. 30, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Equity-Based Compensation
EQUITY-BASED COMPENSATION:
Stock Incentive Plans
On May 19, 2011, Quanta’s stockholders approved the 2011 Omnibus Equity Incentive Plan (the 2011 Plan). The 2011 Plan provides for the award of non-qualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock, RSUs, stock bonus awards, performance compensation awards (including performance units and cash bonus awards) or any combination of the foregoing. The purpose of the 2011 Plan is to attract and retain key personnel and provide participants with additional performance incentives by increasing their proprietary interest in Quanta. Employees, directors, officers, consultants or advisors of Quanta or its affiliates are eligible to participate in the 2011 Plan, as are prospective employees, directors, officers, consultants or advisors of Quanta who have agreed to serve Quanta in those capacities. On May 24, 2018, Quanta’s stockholders approved an amendment to the 2011 Plan that, among other things, increased the number of shares of Quanta common stock that may be issued thereunder. An aggregate of 13,300,000 shares of Quanta common stock may be issued pursuant to awards granted under the 2011 Plan. Quanta also has a Restricted Stock Unit Plan (the RSU Plan), pursuant to which RSUs may be awarded to certain employees and consultants of Quanta’s Canadian operations. The 2011 Plan and the RSU Plan are referred to as the Plans.
RSUs to be Settled in Common Stock
During the three months ended June 30, 2018 and 2017, Quanta granted a nominal amount and 0.1 million of RSUs to be settled in common stock under the 2011 Plan with weighted average grant date fair values of $36.38 and $33.32. During the six months ended June 30, 2018 and 2017, Quanta granted 1.3 million and 1.2 million of RSUs to be settled in common stock under the 2011 Plan with weighted average grant date fair values of $34.52 and $37.76. The grant date fair value for RSUs to be settled in common stock is based on the market value of Quanta common stock on the date of grant. RSU awards to be settled in common stock are subject to forfeiture, restrictions on transfer and certain other conditions until vesting, which generally occurs in equal installments over a two-year, three-year or five-year period following the date of grant. Holders of RSUs to be settled in common stock are entitled to receive a cash dividend equivalent payment equal to any cash dividend payable on account of common shares.
During each of the three months ended June 30, 2018 and 2017, vesting activity consisted of 0.1 million of RSUs settled in common stock with an approximate fair value at the time of vesting of $3.8 million. During the six months ended June 30, 2018 and 2017, vesting activity consisted of 1.3 million and 1.4 million of RSUs settled in common stock with an approximate fair value at the time of vesting of $46.2 million and $54.3 million.
During the three months ended June 30, 2018 and 2017, Quanta recognized $10.8 million and $10.1 million of non-cash stock compensation expense related to RSUs to be settled in common stock. During the six months ended June 30, 2018 and 2017, Quanta recognized $22.0 million and $21.3 million of non-cash stock compensation expense related to RSUs to be settled in common stock. Such expense is recorded in selling, general and administrative expenses. As of June 30, 2018, there was $56.2 million of total unrecognized compensation expense related to unvested RSUs to be settled in common stock granted to both employees and non-employees. This cost is expected to be recognized over a weighted average period of 2.03 years.
Performance Units to be Settled in Common Stock
Performance units awarded pursuant to the 2011 Plan provide for the issuance of shares of common stock upon vesting. These performance units cliff-vest at the end of a three-year performance period based on achievement of certain performance metrics established by Quanta’s compensation committee, including company performance goals and, with respect to certain awards, Quanta’s total shareholder return as compared to a predetermined group of peer companies. The final number of shares of common stock issuable upon vesting of performance units can range from 0% to 200% of the number of performance units, depending on the level of achievement, as determined by Quanta’s compensation committee.
During the three months ended June 30, 2018 and 2017, Quanta did not grant any performance units to be settled in common stock under the 2011 Plan. During each of the six months ended June 30, 2018 and 2017, Quanta granted 0.3 million performance units to be settled in common stock under the 2011 Plan with a weighted average grant date fair value of $12.24 and $17.63 per unit. The grant date fair values for awards of performance units with market-based metrics, which were granted in the six months ended June 30, 2018 and 2017, were determined using a Monte Carlo simulation valuation methodology using the following key inputs:
 
 
2018
 
2017
Valuation date stock price based on the February 28, 2018 and March 22, 2017 closing stock prices
 
$34.44
 
$36.31
Expected volatility
 
34
%
 
36
%
Risk-free interest rate
 
2.39
%
 
1.46
%
Term in years
 
2.84

 
2.78


Quanta recognizes expense related to performance units with market-based metrics based on the probability of achievement of the underlying performance metrics, multiplied by the portion of the three-year period that has expired and the fair value of the total number of shares of common stock that Quanta anticipates will be issued based on such achievement. Quanta recognizes expense related to performance units without market-based metrics based on the portion of the three-year period that has expired multiplied by the fair value of the total number of shares of common stock that Quanta anticipates will be issued. During the three months ended June 30, 2018 and 2017, Quanta recognized $2.7 million and $1.4 million in compensation expense associated with performance units. During the six months ended June 30, 2018 and 2017, Quanta recognized $6.2 million and $2.1 million in compensation expense associated with performance units. Such expense is recorded in selling, general and administrative expenses. During each of the three months ended June 30, 2018 and 2017, no performance units vested, and no shares of common stock were issued in connection with performance units. During each of the six months ended June 30, 2018 and 2017, 0.1 million performance units vested, and 0.1 million shares of common stock were issued in connection with performance units.
RSUs to be Settled in Cash
Certain RSUs granted by Quanta under the Plans are settled solely in cash. These cash-settled RSUs are intended to provide plan participants with cash performance incentives that are substantially equivalent to the risks and rewards of equity ownership in Quanta, typically vest in equal installments over a two-year or three-year period following the date of grant, and are subject to forfeiture under certain conditions, primarily termination of service. Additionally, subject to certain restrictions, Quanta’s non-employee directors may elect to cash settle a portion of their RSU awards, which generally vest upon conclusion of the director service year. For RSUs settled in cash, the holders receive for each vested RSU an amount in cash equal to the fair market value of one share of Quanta common stock on the settlement date, as specified in the applicable award agreement.
Compensation expense related to RSUs to be settled in cash was $1.5 million and $1.2 million for the three months ended June 30, 2018 and 2017 and $2.8 million and $3.9 million for the six months ended June 30, 2018 and 2017. Such expense is recorded in selling, general and administrative expenses. RSUs that are anticipated to be settled in cash are not included in the calculation of earnings per share, and the estimated earned value of such RSUs is classified as a liability. Quanta paid $3.8 million and $3.8 million to settle liabilities related to cash-settled RSUs in the three months ended June 30, 2018 and 2017 and $6.0 million and $6.1 million to settle liabilities related to cash-settled RSUs in the six months ended June 30, 2018 and 2017. Accrued liabilities for the estimated earned value of outstanding RSUs to be settled in cash were $1.4 million and $4.6 million at June 30, 2018 and December 31, 2017.