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Capital Stock and Stock Compensation
3 Months Ended
Mar. 31, 2017
Capital Stock and Stock Compensation [Abstract]  
Capital Stock and Stock Compensation

Note 11 — Capital Stock and Stock Compensation:

 

Change in Capital Structure

On May 13, 2016, all holders of Class B common stock and Class B warrants as of May 9, 2016 received a distribution from the Company representing their pro-rata share of the Net Litigation Recovery (see Note 2, “Chapter 11 Filing and Emergence from Bankruptcy”). On May 27, 2016, pursuant to the Company’s Amended and Restated Certificate of Incorporation, and the warrant agreement governing the Class B warrants, each Class B common share and Class B warrant automatically converted to a Class A common share and Class A warrant, respectively.

On June 2, 2016, the Board authorized the Company to take action to transfer the listing of its Class A common stock to the New York Stock Exchange from the NYSE MKT (the “Transfer”). In conjunction with the Transfer, the Board approved the Reverse Split Amendment, and the Reverse Split Amendment became effective on June 13, 2016 (See Note 1 “Basis of Presentation”). The Transfer was approved by the New York Stock Exchange on June 23, 2016. All of the share and per share information below has been recast to reflect the impact of the reverse stock split. 



Holders of the Company’s outstanding Class A warrants are entitled to receive, upon exercise, 0.190 shares of Class A common stock per warrant exercised, in order to account for the impact of the reverse stock split.

The Incentive Plans described below contain anti-dilution provisions whereby in the event of any change in the capitalization of the Company, the number and type of securities underlying outstanding awards must be adjusted, as appropriate, in order to prevent dilution or enlargement of rights. The impact of these provisions resulted in a modification of all outstanding awards upon the reverse stock split. As the fair value of the awards immediately before and after the modification did not change, no additional compensation was recognized as a result of such modification.  



On November 30, 2016 the Company completed the separation of its business into two independently publicly-traded companies through the spin-off of INSW. On the Distribution Date, each holder of OSG common stock received 0.3333 shares of INSW’s common stock for every share of OSG common stock held on the Record Date. Each holder of OSG warrants received 0.3333 shares of INSW’s common stock for every one share of OSG common stock they would have received if they exercised their warrants immediately prior to the Distribution.

Pursuant to the Employee Matters Agreement described in Note 5,” Discontinued Operations,” and below, unvested share based payment awards of OSG employees that transitioned to INSW were assumed by INSW and converted into equivalent awards of INSW’s equity.



Share and Warrant Repurchases



During the three months ended March 31, 2016, the Company repurchased 76,817 shares of its Class A common stock in open-market purchases on the NYSE MKT at an average price of $12.64 per share, for a total cost of $971. In addition, during the three months ended March 31, 2016, the Company repurchased 24,999,078 Class A warrants in private transactions with non-affiliates at an average per share equivalent cost of $12.19 for a total cost of $56,990.

In connection with the vesting of restricted stock units in the first quarter of 2016, the Company repurchased 20,757 shares of Class A common stock at an average cost of $14.81 per share (based on the market prices on the dates of vesting) from certain members of management to cover withholding taxes. 



Warrant Conversions

 

During the three months ended March 31, 2017, the Company issued 3,209,648 shares of Class A common stock as a result of the exercise of 16,931,530 Class A warrants. During the three months ended March 31, 2016, the Company issued 1,512,594 shares of Class A common stock and 7,833 shares of Class B common stock as a result of the exercise of 8,285,284 Class A warrants and 46,997 Class B warrants, respectively.

 

Stock Compensation

 

The Company accounts for stock compensation expense in accordance with the fair value based method required by ASC 718, Compensation – Stock Compensation. Such fair value based method requires share based payment transactions to be measured based on the fair value of the equity instruments issued.



Management Compensation —  Restricted Stock Units and Stock Options

  

During the three months ended March 31, 2017, the Company granted 165,010 time-based restricted stock units (“RSUs”) to its employees, including senior officers. The average grant date fair value of these awards was $4.04 per RSU. Each RSU represents a contingent right to receive one share of Class A common stock upon vesting. Each award of RSUs will vest in equal installments on each of the first three anniversaries of the grant date.



During the three months ended March 31, 2017, the Company awarded 63,532 performance-based RSUs to its senior officers. Each performance stock unit represents a contingent right to receive RSUs based upon continuous employment through the end of the three-year performance period commencing on January 1, 2017 and ending on December 31, 2019 (the “Performance Period”) and shall vest as follows: (i) one-half of the target RSUs shall vest and become nonforfeitable on March 23, 2020, subject to OSG’s return on invested capital (“ROIC”) performance in the three-year ROIC performance period relative to a target rate (the “ROIC Target”) set forth in the award agreements. (The formula for ROIC is net operating profit after taxes divided by the net of total debt plus shareholders equity less cash); and (ii) one-half of the target RSUs will be subject to OSG’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group over a three-year TSR performance period (“TSR Target”). The peer group will consist of companies that comprise the Standard and Poor’s Transportation Select Index during the performance Period. Vesting is subject in each case to the Human Resources and Compensation Committee’s (“HRC”) certification of achievement of the performance measures and targets no later than March 31, 2020.

Both the ROIC target RSUs and the TSR target RSUs are subject to an increase up to a maximum of 47,647 target RSU’s (aggregate 95,294 target RSU’s) or decrease depending on performance against the applicable measure and targets. The ROIC Performance Goal is a performance condition which, as of March 31, 2017, management believed, was not yet considered probable of being achieved. Accordingly, for financial reporting purposes, no compensation costs have been recognized to date, and none will be recognized for these awards until it becomes probable that the performance conditions will be achieved. The grant date fair value of the TSR based performance awards, which has a market condition, was determined to be $4.04 per RSU.

During the three months ended March 31, 2017, the Company awarded to certain senior officers an aggregate of 135,804 stock options. Each stock option represents an option to purchase one share of Class A common stock for an exercise price of $4.04 per share. The average grant date fair value of the options was $1.89 per option. Stock options may not be transferred, pledged, assigned or otherwise encumbered prior to vesting. Each stock option will vest in equal installments on each of the first three anniversaries of the award date. The stock options expire on the business day immediately preceding the tenth anniversary of the award date. If a stock option grantee’s employment is terminated for cause (as defined in the applicable Form of Grant Agreement), stock options (whether then vested or exercisable or not) will lapse and will not be exercisable. If a stock option grantee’s employment is terminated for reasons other than cause, the option recipient may exercise the vested portion of the stock option but only within such period of time ending on the earlier to occur of (i) the 90th day ending after the option holder’s employment terminated and (ii) the expiration of the options, provided that if the option holder’s employment terminates for death or disability the vested portion of the option may be exercised until the earlier of (i) the first anniversary of employment termination and (ii) the expiration date of the options.

During the three months ended March 31, 2016, the Company granted 119,853 time-based restricted stock units (“RSUs”) to its senior officers. The average grant date fair value of these awards was $11.82 per RSU. Each RSU represented a contingent right to receive one share of Class A common stock upon vesting. As a result of the INSW spin off transaction, the awards granted to former members of OSG senior management that transitioned to INSW were cancelled. The outstanding unvested time-based RSU awards held by the members of senior management that remained with OSG, but who retired from their positions with the Company shortly after the spinoff, were vested in full on December 29, 2016 under the terms of their respective employment agreements.



During the three months ended March 31, 2016, the Company awarded 119,853 performance-based RSUs to its senior officers. Each performance stock unit represents a contingent right to receive RSUs based upon the covered employees being continuously employed through the end of the period over which the performance goals are measured and shall vest as follows: (i) one-third of the target RSUs shall vest on December 31, 2018, subject to OSG’s three-year earnings per share (“EPS”) performance in the three-year EPS performance period relative to a compounded annual growth rate (the “EPS Target”) set forth in the award agreements; (ii) one-third of the target RSUs vest on December 31, 2018, subject to OSG’s return on invested capital (“ROIC”) performance in the three-year ROIC performance period relative to a target rate (the “ROIC Target”) set forth in the award agreements; and (iii) one-third of the target RSUs will be subject to OSG’s three-year total shareholder return (“TSR”) performance relative to that of a performance peer group over a three-year TSR performance period (“TSR Target”). Vesting is subject in each case to the HRC’s certification of achievement of the performance measures and targets no later than March 31, 2019. The EPS Target and ROIC Target are performance conditions which, during 2016, management believed, were not yet considered probable of being achieved. Accordingly, for financial reporting purposes, no compensation costs will be recognized for these awards until it becomes probable that the performance conditions will be achieved. The grant date fair value of the TSR based performance awards, which has a market condition, was determined to be $11.82 per RSU.  The outstanding unvested performance based RSU awards held by the members of senior management that remained with OSG, but who retired from their positions with the Company shortly after the spinoff, were forfeited. As of December 31, 2016, there are no outstanding unvested performance based RSUs relating to this award.  



In addition, during the three months ended March 31, 2016, the Company granted 38,547 performance-based RSUs (which represented the 2016 tranche of the awards made on October 12, 2015) to certain members of senior management. The grant date fair value of the performance awards was determined to be $11.82 per RSU. Each performance stock unit represents a contingent right to receive RSUs based upon certain performance related goals being met and the covered employees being continuously employed through the end of the period over which the performance goals are measured. In conjunction with the INSW spinoff transaction, awards granted to former members of OSG senior management that transitioned to INSW were cancelled. The outstanding unvested performance based RSU awards held by the members of senior management that remained with OSG, but who retired from their positions with the Company shortly after the spinoff, were forfeited. The HRC certified the achievement of the performance measures and targets for this award on March 23, 2017, resulting in 2,856 performance based RSUs being deemed to be vested effective December 31, 2016. Settlement will be made in 2018, in cash or stock at the discretion of the HRC. Achievement of the performance condition in this award was considered probable and accordingly, compensation cost was recognized commencing on March 30, 2016, the grant date of the award.



During the three months ended March 31, 2016, the Company awarded to certain senior officers an aggregate of 319,069 stock options. Each stock option represents an option to purchase one share of Class A common stock for an exercise price of $11.82 per share. The average grant date fair value of the options was $4.74 per option. As a result of the INSW spin off transaction, the awards granted to former members of OSG senior management that transitioned to INSW were cancelled. The outstanding unvested stock options granted in 2016 and prior years and held by the members of senior management that remained with OSG, but terminated employment with the Company shortly after the spinoff date became fully vested in accordance with the terms of their respective employment agreements.