Share-Based Compensation Plans:

12 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

In May 2018, our stockholders approved amendments to our Amended and Restated 2006 Equity Incentive Plan (the “Incentive Plan”) which (i) extended the term of the Incentive Plan through February 6, 2023 and (ii) increased the maximum number of shares authorized for issuance or delivery under the Incentive Plan to 6.8 million. Under the Incentive Plan, we may issue equity stock awards in the form of restricted stock, restricted stock units, stock appreciation rights or stock options. As of December 31, 2019, the Incentive Plan had remaining capacity of 2.3 million awards.

Stock Options – There were no stock options granted during the year ended December 31, 2019. In 2018, our Board of Directors granted 1.1 million stock options to certain officers, executives and other key management employees. Under terms of the grant award, the stock options vest ratably over a three-year period from the date of grant and the exercise price of the option equaled the market value of our common stock on the date of grant. The maximum term for each option granted is 10 years. We measure the cost of employee stock options based on the grant-date fair value and recognize that cost on a straight-line basis over the period in which a recipient is required to provide services in exchange for the options, which is equal to the vesting period. Our practice is to issue new shares of common stock upon the exercise of stock options.

The weighted average fair value of stock options granted during the year ended December 31, 2018 was $4.25 per share using the Black-Scholes option-pricing model based on the following weighted average assumptions: expected life of 6.1 years, expected volatility of 58.7 percent and risk-free interest rate of 2.6 percent.

We had 0.9 million and 1.0 million of stock option awards outstanding as of December 31, 2019 and 2018, respectively, all of which have exercise prices that are significantly higher than the current market price of our common stock and, therefore, are not likely to be exercised. At December 31, 2019, total unamortized compensation cost for non-vested stock option awards amounted to $1.2 million and is expected to be recognized over a weighted average period of 1.2 years. Share-based compensation expense for stock options was $1.1 million in 2019 and $1.0 million in 2018.

Restricted Stock and Restricted Stock Units - Our board of directors may approve grants of restricted stock and restricted stock units to officers, executives, non-employee directors and certain management employees. Grants may include time-based and performance-based awards. Time-based awards granted to employees generally vest over a service period of two or three years. Performance-based restricted stock units may vest in a number of shares from zero to 150.0 percent of their award based on attainment of specified targets over a three-year period.

There were no service-based restricted stock units granted in 2019. In February 2019, we granted 0.7 million performance-based restricted stock units with a grant date fair value of $2.4 million that were scheduled to vest three years from the date of grant. These awards were subsequently canceled and replaced with cash-based awards during the second quarter of 2019. There were no performance-based restricted units granted in 2018. In 2017, Windstream granted 0.7 million performance-based restricted stock units with a grant date fair value of $26.1 million that vest ratably over the remaining service period (up to 3 years) or vest contingently at the end of the performance period. The three-year operating target for the performance-based restricted stock units granted in 2017 was approved by the board of directors in May 2017. During the second quarter of 2019, we determined that the three-year operating target would not be met by the end of the measurement period, and accordingly, all compensation expense previously recognized for these performance-based awards was reversed.

12. Share-Based Compensation Plans, Continued:

In light of our Chapter 11 filing, the vesting date for certain service-based restricted stock was extended from March 1, 2019, May 1, 2019 and March 1, 2020 to December 1, 2020. Additionally, the delivery of shares for performance-based restricted stock units vested on March 1, 2019 was delayed until March 14, 2020.

The vesting periods and grant date fair values for restricted stock and restricted stock units issued, including the EarthLink replacement awards issued in 2017, were as follows for the years ended December 31:



(Number of shares in thousands)	2019		2018		2017
Service-based restricted stock and restricted units:
Vest variably over remaining service period, up to three-years	—		—		571.7
Vest ratably over a three-year service period	—		—		490.3
Vest one year from date of grant, service based - granted to non-employee directors	—		109.6		41.4
Vest immediately on date of grant, service based - granted to non-employee directors	—		41.1		—
Vest three years from date of grant, service based	—		—		6.8
Total granted	—		150.7		1,110.2
Grant date fair value (Dollars in millions)	$	—	$	1.1	$	33.3

Restricted stock and restricted unit activity for the year ended December 31, 2019 was as follows:



	Service-Based				Performance-Based
	(Thousands) Underlying Number of Shares		Weighted Average Fair Value Per Share		(Thousands) Underlying Number of Shares		Weighted Average Fair Value Per Share
Non-vested at December 31, 2018	522.1		$	23.34	325.4		$	28.35
Granted	—		$	—	698.5		$	3.40
Vested	(143.5	)	$	32.57	(160.8	)	$	28.91
Forfeited	(19.0	)	$	34.83	(740.1	)	$	4.77
Non-vested at December 31, 2019	359.6		$	19.05	123.0		$	27.80

At December 31, 2019, unrecognized compensation expense for restricted stock and restricted stock units totaled $0.6 million and will be recognized in 2020. The total fair value of shares vested was $9.3 million, $22.7 million and $40.0 million during 2019, 2018 and 2017, respectively. Share-based compensation expense recognized for restricted stock and restricted stock units was $1.6 million, $10.3 million and $32.5 million for 2019, 2018 and 2017, respectively.

In addition to including amounts related to restricted stock and restricted units, share-based compensation expense presented in the accompanying consolidated statements of cash flow also includes the matching contribution to the employee savings plan for which payments to eligible participants were made in Windstream Holdings common stock. A summary of share-based compensation expense was as follows for the years ended December 31:



(Millions)	2019		2018		2017
Restricted stock, restricted units and stock options	$	2.7	$	11.3	$	32.5
Employee savings plan (See Note 11)	—		—		22.9
Share-based compensation expense	$	2.7	$	11.3	$	55.4