CJ 2017 Annual Report

public company data, with consideration given to the Company’s limited historical data. The Company makes estimates with respect to employee termination and forfeiture rates of the options within the valuation model. The risk-free rate is based on the approximate U.S. Treasury yield rate in effect at the time of grant. During the year ended December 31, 2017, approximately 0.4 million nonqualified stock options were granted under the MIP to certain of the Company's executive officers at a fair market value ranging from $16.55 to $22.19 per nonqualified stock option. Stock options granted during the first quarter of 2017 will expire on the tenth anniversary of the grant date and will vest over three years of continuous service from the grant date, with 34% vesting immediately upon the grant date, and 22% on each of the first, second and third anniversaries of the grant date. Stock options granted during the fourth quarter of 2017 will expire on the tenth anniversary of the grant date and will vest over three years of continuous service from the grant date, with one-third vesting on each of the first, second and third anniversaries of the grant date. The following table presents the assumptions used in determining the fair value of option awards granted during the year ended December 31, 2017. Year Ended December 31, 2017 Expected volatility 50.1% - 53.2% Expected dividends None Exercise price $30.83 - $42.65 Expected term (in years) 5.7 - 6.0 Risk-free rate 2.03% - 2.24% The weighted average grant date fair value of options granted during the year ended December 31, 2017 was $20.66. A summary of the Company’s stock option activity for the year ended December 31, 2017 is presented below. Stock Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life Aggregate Intrinsic Value (in thousands) (in years) (in thousands) Outstanding at December 31, 2016 (Predecessor) 4,416 $ 13.18 3.86 $ — Canceled (4,416) 13.18 3.86 — Outstanding at January 1, 2017 (Successor) — $ — — $ — Granted 351 39.43 — — Exercised — — — — Forfeited — — — — Outstanding at December 31, 2017 (Successor) 351 $ 39.43 9.34 $ 253 Exercisable at December 31, 2017 (Successor) 87 $ 42.65 9.10 $ — As of December 31, 2017, the Company had approximately $4.2 million in unrecognized compensation cost related to outstanding stock options to be expensed over a weighted average remaining service period of 2.4 years. Restricted Stock The value of the Company’s outstanding restricted stock is based on the closing price of the Company’s common stock on the NYSE on the date of grant. During year ended December 31, 2017, approximately 1.7 million shares of restricted stock were granted to employees and non-employee directors under the MIP, at fair market values ranging from $31.52 to $44.90 per share of restricted stock. Restricted stock awards granted to employees during the first quarter of 2017 will vest over three years of continuous service from the grant date, with 34% having vested immediately upon the grant date, and 22% on each of the first, second and third anniversaries of the grant date. Restricted stock awards granted to non-employee directors will vest in full on the first anniversary of the date of grant, subject to each director's continued service. Restricted stock C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 101