11. Share-Based and Cash-Based Incentive Compensation

In accordance with the Compensation – Stock Compensation topic of the Codification, we recognize compensation cost on a straight line basis for share-based payments to employees and non-employee directors over the period during which the recipient is required to provide service in exchange for the award, based on the fair value of the equity instrument on the date of grant. We are also required to estimate forfeitures, resulting in the recognition of compensation cost only for those awards that actually vest.

As allowed by the Plan, in August 2011 and August 2010, the Company granted RSUs to certain of its employees and in January 2011, the Company granted restricted stock to one of its employees. Prior to 2010, the Company granted only restricted stock to its employees. In 2011 and in prior years, restricted stock was granted to the Company's non-employee directors under the Director Compensation Plan. In addition to share-based compensation, the Company granted its employees cash-based incentive awards in 2011 and in 2010.

At December 31, 2011, there were 2,269,745 shares of common stock available for award under the Plan and 568,783 shares of common stock available for award under the Directors Compensation Plan.

Restricted Stock

Under the Company's share-based payment plans, restricted shares were issued to only one employee in 2011 and no restricted shares were issued to employees in 2010. Restricted shares were issued to employees in 2009. In 2011, 2010 and 2009, restricted shares were issued to the Company's non-employee directors. Restricted shares are subject to forfeiture until vested and cannot be sold, transferred or disposed of during the restricted period. The holders of restricted shares generally have the same rights as a shareholder of the Company with respect to such shares, including the right to vote and receive dividends or other distributions paid with respect to the shares.

 

A summary of share activity related to restricted stock is as follows:

 

		2011								2010								2009
		Restricted Shares				Weighted Average Grant  Date Price Per Share				Restricted Shares				Weighted Average Grant  Date Price Per Share				Restricted Shares				Weighted Average Grant  Date Price Per Share
Nonvested, beginning of period			470,392			$	7.42				1,050,506			$	8.48				233,703			$	30.33
Granted			20,433				25.45				35,000				10.00				1,570,436				6.91
Vested			(404,422	)			7.31				(485,934	)			9.69				(653,676	)			12.18
Forfeited			(34,533	)			6.83				(129,180	)			8.15				(99,957	)			10.77
Nonvested, end of period			51,870				15.81				470,392				7.42				1,050,506				8.48

At December 31, 2011, the composition of our restricted stock awards outstanding, by year granted, was as follows:

 

The grant date fair value of restricted stock granted during the years 2011, 2010 and 2009 was $0.5 million, $0.4 million and $10.9 million, respectively. The fair value of the restricted stock that vested during the years ended 2011, 2010 and 2009 was $7.9 million, $8.1 million and $7.4 million, respectively, based on the closing prices on the dates of vesting.

Restricted Stock Units

During 2011 and 2010, the Company awarded to certain employees RSUs that were 100% contingent upon meeting specified performance requirements. The specific performance requirements were achieved in 2011 and 2010. Vesting occurs upon completion of the specified vesting period applicable to each award. Effective January 2012, the RSUs awarded in 2011 and 2010 will earn dividend equivalents at the same rate as dividends paid on our common stock. During 2011, RSUs awarded in 2010 earned dividend equivalents at the same rate as dividends paid on our common stock. RSUs awarded in both years are subject to forfeiture until vested and cannot be sold, transferred or disposed of during the restricted period.

 

A summary of share activity related to RSUs is as follows:

 

During the years 2011 and 2010, the grant date fair value of RSUs granted was $14.4 million and $12.0 million, respectively.

Share-Based Compensation

A summary of compensation expense under share-based payment arrangements and the related tax benefit is as follows (in thousands):

 

		Year Ended December 31,
		2011				2010				2009
Share-based compensation expense from:
Restricted stock		$	2,377			$	3,469			$	7,730
Restricted stock units			7,333				2,064				—
Total		$	9,710			$	5,533			$	7,730
Share-based compensation tax benefit:
Tax benefit computed at the statutory rate		$	3,399			$	1,937			$	2,706

As of December 31, 2011, unrecognized share-based compensation expense related to our issued restricted shares and RSUs was $0.6 million and $15.7 million, respectively. Unrecognized compensation expense will be recognized through April 2014 for restricted shares and November 2013 for RSUs.

Cash-based Incentive Compensation

As defined by the Plan, annual incentive awards may be granted to eligible employees payable in cash. These awards are performance-based awards consisting of one or more business criteria or individual performance criteria and a targeted level or levels of performance with respect to each of such criteria. Generally, the performance period is the calendar year and determination and payment is made in cash in the first quarter of the following year.

 

Share-Based Compensation and Cash-Based Incentive Compensation Expense

A summary of incentive compensation expense is as follows (in thousands):

 

		Year Ended December 31,
		2011				2010				2009
Share-based compensation expense included in:
Lease operating expense		$	466			$	748			$	2,242
General and administrative			9,244				4,785				5,488
Total charged to operating income (loss)			9,710				5,533				7,730
Cash-based incentive compensation included in:
Lease operating expense			3,700				2,067				1,472
General and administrative			12,213				8,539				1,525
Total charged to operating income (loss)			15,913				10,606				2,997
Total incentive compensation charged to operating income (loss)		$	25,623			$	16,139			$	10,727