Notes to Financial Statements
December 31, 2015 and 2014
A.
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Description of the Plan
|
Plan Description
The following description of the Range Resources Corporation 401(k) Plan (the Plan) provides only general information. The Plan is
sponsored by Range Resources Corporation (the Company or Plan Sponsor). Participants should refer to the Plan agreement for a more complete description of the Plans provisions.
General
The Plan was established
effective January 1, 1989, and most recently amended effective January 1, 2013, as a defined contribution plan covering employees of the Company who are eighteen years of age or older. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 (ERISA).
The purpose of the Plan is to encourage employees to save and invest,
systematically, a portion of their current compensation in order that they may have a source of additional income upon their retirement, or for their family in the event of death.
Contributions
Participants may
contribute up to 75% of their pre-tax annual compensation, as defined by the Plan. Contributions are subject to limitations on annual additions and other limitations imposed by the Internal Revenue Code (the Code) as defined in the Plan
agreement. The Plan allows for both pre-tax and Roth after-tax contributions.
Employees are immediately eligible to participate in the
Plan. The Company has an automatic enrollment feature under the Plan. Those employees that do not make an affirmative election to not contribute to the Plan are automatically enrolled in the Plan approximately 45 to 60 days from hire with
contributions equal to 6% of pre-tax annual compensation. If those employees added to the Plan under the automatic enrollment feature do not change their deferral, the deferral will increase 1% on January 1
st
of each year up to a maximum of 10%.
Employees who are eligible to make salary
deferral contributions under the Plan and who have attained age 50 before the close of the Plan year, are eligible for catch-up contributions in accordance with and subject to the limitations imposed by the Code.
Beginning January 1, 2008, the Company began a Qualified Automatic Safe Harbor Matching Contribution (QASH) in the amount of
100% of the first 6% of deferred compensation. QASH contributions were approximately $6,105,000 and $5,829,000 during 2015 and 2014, respectively.
At the discretion of the Board of Directors, the Company may elect to contribute an additional matching contribution based on the amounts of
salary and/or bonus deferrals of the participants. The Board did not elect any matching contributions in addition to the QASH contributions in 2015 or 2014.
Participant Accounts
Each
participants account is credited with the participants elective contributions, employer contribution(s), and earnings thereon. Allocations are based on participant earnings as defined in the Plan. The benefit to which a participant is
entitled is the benefit that can be provided from the participants vested account.
F-4
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
A.
|
Description of the Plan continued
|
Vesting
Participants are immediately fully vested in their elective contributions plus actual earnings thereon. Effective January 1, 2013, all
matching contributions are immediately vested. Prior to January 1, 2013, vesting in the Company contributions portion of their accounts plus actual earnings thereon was as follows:
|
|
|
|
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Years of Service
|
|
Vested
Percentage
|
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Less than One (1) year
|
|
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0
|
%
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One (1) year
|
|
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50
|
%
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Two (2) years
|
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50
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%
|
Loans
Participants may borrow from their fund accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested
account balance. Loan terms range from one to five years or, in the case of a loan to acquire or construct the primary residence of a participant, a period not to exceed a repayment period used by commercial lenders for similar loans. The loans are
secured by the balance in the participants account and bear interest at the prime rate plus 2.00%, as defined by the Participant Loan Program. Interest rates for outstanding loans ranged from 5.25% to 7.00% for December 31, 2015 and
ranged from 5.25% to 10.00% for December 31, 2014. Principal and interest are paid ratably through payroll deductions.
Benefit Payments
Participants withdrawing during the year for reasons of service or disability, retirement, death, or termination are entitled to their vested
account balance. Benefits are distributed in the form of rollovers, lump sum distributions or installment payments. If withdrawing participants are not entitled to their entire account balance, the amounts not received are forfeited. See additional
discussion below.
A participant may receive a hardship distribution from salary deferrals if the distribution is: (1) on account of
uninsured medical expenses incurred by the participant, their spouse or dependents; (2) to purchase (excluding mortgage payments) a principal residence of the participant; (3) for the payment of post-secondary tuition expenses;
(4) needed to prevent eviction of the participant from his or her principal residence or foreclosure upon the mortgage of the participants principal residence; (5) on account of funeral or burial expenses relating to the death of the
participants deceased parent, spouse, child or dependent; or (6) on account of casualty expenses to repair damage to the participants principal residence.
Forfeitures
All forfeitures are used to
fund Plan expenses such as recordkeeping fees and consulting fees paid in connection with the audit of the Plan.
F-5
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
B.
|
Summary of Significant Accounting Policies
|
Basis of Accounting
The financial statements of the Plan are presented on the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP).
Recent Accounting Pronouncements
In May 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-07, Fair
Value Measurement (Topic 820), Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent). The ASU impacts reporting entities that measure an investments fair value using the NAV
per share (or an equivalent) practical expedient as prescribed in the FASBs fair value measurement guidance. ASU 2015-07 eliminates the requirement to classify the investment within the fair value hierarchy if the fair value is measured at NAV
per share (or its equivalent). In addition, the requirement to make specific disclosures for all investments eligible to be assessed at fair value with the NAV per share practical expedient has been removed. Instead, such disclosures are restricted
only to investments that the entity has decided to measure using the practical expedient. ASU 2015-07 is effective for periods beginning after December 15, 2015 and interim periods within those fiscal years, with early adoption permitted. The
adoption of ASU No. 2015-07 is not expected to have an impact on the reported net assets or changes in net assets.
In July 2015, the
FASB issued accounting standards updateASU 2015-12 that simplifies certain aspects of employee benefit plan accounting. The amendments in Part I of the standard eliminated the requirements that participant benefit plans measure the fair value of
fully benefit-responsive investment contracts and provide the related fair value disclosures; rather these contracts will be measured and disclosed only at contract value. The amendments in Part II of the standard eliminated the requirements to
disclose net appreciation/ depreciation in fair value of investments by general type and the requirements to disclose individual investments that represent 5% or more of net assets available for benefits. The amendments in Part III of the standard
provide a practical expedient that permits plans to measure its investments and investment related accounts as of a month-end date closest to its fiscal year for a plan with a fiscal year end that does not coincide with the end of a calendar month.
These amendments are effective for reporting periods after January 1, 2016, with early adoption permitted. Plan management has reviewed this standard and early adopted Part I and Part II as of December 31, 2015 in order to simplify Plan
accounting and its presentation in the accompanying financial statements. Part III of the standard is not applicable to the Plan. These changes were applied retrospectively and eliminated the adjustment from fair value to contract value for the
common collective trust in the Statements of Net Assets available for Benefits as of December 31, 2015 and 2014. The Statements of Changes of Net Assets Available for Benefits was not impacted. Other notes within the financial statements have
been removed or adjusted to reflect the amendments described in Parts I and II of the standard.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP, requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses. Actual results could differ from those estimates.
Reclassifications
Certain
reclassifications have been made to the prior years reported amounts in order to conform to thecurrent year presentation. These reclassifications include the adjustment for the common collective trust to contract value from fair value that was
made as a result of our adoption of ASU 2015-12 as described above. This reclassification was made on the Statement of Net Assets Available for Benefits and did not impact the Statement of Changes in Net Assets Available for Benefits.
F-6
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
B.
|
Summary of Significant Accounting Policies continued
|
Investment Valuation and Income
Recognition
The Plans investments are stated at fair value. Quoted market prices are used to value investments in the mutual
funds, self-directed brokerage investments, and Range Resources Corporation common stock and there are no redemption restrictions on these investments. The Plans interest in the common collective trust is valued based on information reported
by the investment manager using the audited financial statements of the common collective trust at year-end based on contract value. These investments are subject to market or credit risks customarily associated with equity investments.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date. Net realized gains or losses from security transactions are reported on the average historical cost method.
Unrealized appreciation or depreciation of investments represents the increase or decrease in market value during the year.
Investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant
measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were
to initiate permitted transactions under the terms of the Plan. The Plan invests in investment contracts through a common collective trust. The contract value of the investment in the common collective trust is presented in the Statement of Net
Assets Available for Benefits and Statement of Changes in Net Assets Available for Benefits as of and for the years ended December 31, 2015 and 2014.
Contributions
Contributions from
participants and the Company are accrued in the period in which they are deducted in accordance with salary deferral agreements and as they become obligations of the Company, as determined by the Plans administrator.
Payment of Benefits
Benefits are
recorded when paid.
Plan Expenses
Employees of the Company perform certain administrative functions with no compensation from the Plan. Administrative costs of the Plan are paid
by the Company or with forfeitures and are not reflected in the accompanying financial statements.
Notes Receivable from Participants
Notes receivable from participants are valued at the unpaid principal balance plus any accrued but unpaid interest.
F-7
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
Participants may direct their 401(k) salary and/or bonus deferrals and
employer contributions to be invested into any of the investment options offered by the Plan, including Range Resources Corporation common stock. Additionally, upon election, employees can use a self-directed brokerage account where monies are
invested in mutual funds and investment decisions are directed by employees. Employees are limited to a maximum investment in the self-directed brokerage account of 50% of their 401(k) investment balance.
Common stock of the Company represented approximately 12% of net assets available for benefits at December 31, 2015 compared to 20% of
net assets available for benefits at December 31, 2014.
Effective January 1, 2013, the Company adopted a T. Rowe Price
prototype plan which has been approved by the Internal Revenue Service for use by employers as a qualified plan. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. Management believes the Plan
is being operated in compliance with the applicable requirements of the Code and, therefore, believes that the Plan is qualified and the related trust is tax exempt.
The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The
Plan administrator believes it is no longer subject to income tax examination for years prior to 2012.
At December 31, 2015 the balance in the forfeiture account was $0 and
approximated $22,800 at December 31, 2014. Forfeitures utilized to pay plan expenses approximated $22,800 and $1,400 for 2015 and 2014 Plan years, respectively.
F.
|
Transactions with Related Parties and Parties-in-Interest
|
Party-in-interest
transactions include those with fiduciaries or employees of the Plan, any person who provides services to the Plan, an employer whose employees are covered by the Plan, an employee organization whose members are covered by the Plan, a person who
owns 50% or more of such an employer or employee organization, or relatives of such persons.
Participants have the option to invest their
salary and/or bonus deferrals into the Companys common stock. In addition, the Plan invests in shares of mutual funds and a common collective trust managed by T. Rowe Price, which acts as Trustee for these investments as defined by the Plan.
Transactions in such investments, as well as notes receivable from participants, qualify as parties-in-interest transactions, which are exempt from the prohibited transaction rules.
Although it has not expressed any intent to do so, the Company has the
right to terminate the Plan at any time, subject to the provisions of ERISA. In the event of such termination of the Plan, participants would become fully vested and the net assets of the Plan would be distributed among the participants in
accordance with ERISA.
F-8
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
H.
|
Fair Value Measurements
|
In accordance with U.S. GAAP, fair value measurements are based
upon inputs that market participants use in pricing an asset or liability, which are classified into two categories, observable inputs and unobservable inputs. Observable inputs represent market data obtained from independent sources, whereas
unobservable inputs reflect a companys own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two types of inputs are further prioritized into the following fair value
input hierarchy:
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Level 1
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Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities as of the reporting date.
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Level 2
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Pricing inputs are other than quoted prices in active markets included in Level 1, which are directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or
other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the
underlying instruments, as well as other relevant economic measures. Where observable inputs are available, directly or indirectly, for substantially the full term of the asset or liability, the instrument is categorized in Level 2.
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Level 3
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Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in managements best estimate of fair
value.
|
The Plan uses a market approach for fair value measurements and endeavors to use the best information
available. Accordingly, valuation techniques that maximize the use of observable inputs are favored.
These items are classified in their
entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets
and liabilities within the levels of the fair value hierarchy. Mutual funds in Level 1 are measured at fair value with a market approach using net asset values (NAV) of the shares held by the Plan at year-end. Range Resources Corporation
common stock in Level 1 is exchange traded and measured at fair value with a market approach using the closing price. The common collective trust in Level 2 is measured based on information reported by the investment manager using the audited
financial statements of the trust for the Plans year-end and relies on the trusts NAV as a practical expedient. Self-directed brokerage in Level 1 is measured at fair value with a market approach using the NAV of the mutual fund shares
held by the Plan at year-end. For investments valued at NAV, there are no significant restrictions on redeeming these investments at NAV.
F-9
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
H.
|
Fair Value Measurements continued
|
The following tables present the fair value hierarchy table for investments measured at fair value, on a
recurring basis:
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|
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|
|
|
|
|
|
|
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Fair Value Measurements at December 31, 2015 Using
|
|
|
|
Total Carrying
Value as of
December 31,
2015
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Mutual Funds
|
|
$
|
81,365,856
|
|
|
$
|
81,365,856
|
|
|
$
|
|
|
|
$
|
|
|
Range Resources Corporation common stock
|
|
|
12,396,857
|
|
|
|
12,396,857
|
|
|
|
|
|
|
|
|
|
Common collective trust
|
|
|
10,544,742
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|
|
|
|
|
|
|
10,544,742
|
|
|
|
|
|
Self-directed brokerage
|
|
|
155,347
|
|
|
|
155,347
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total investment at fair value
|
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$
|
104,462,802
|
|
|
$
|
93,918,060
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|
|
$
|
10,544,742
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|
|
$
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|
|
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|
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|
|
|
|
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|
|
|
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|
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Fair Value Measurements at December 31, 2014 Using
|
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|
|
Total Carrying
Value as of
December 31,
2014
|
|
|
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
|
|
|
Significant
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Mutual Funds
|
|
$
|
81,686,301
|
|
|
$
|
81,686,301
|
|
|
$
|
|
|
|
$
|
|
|
Range Resources Corporation common stock
|
|
|
23,647,850
|
|
|
|
23,647,850
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|
|
|
|
|
|
|
|
|
Common collective trust
|
|
|
8,359,359
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|
|
|
|
|
|
|
8,359,359
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|
|
|
|
|
Self-directed brokerage
|
|
|
265,244
|
|
|
|
265,244
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total investment at fair value
|
|
$
|
113,958,754
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|
|
$
|
105,599,395
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|
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$
|
8,359,359
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|
|
$
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|
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|
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|
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F-10
RANGE RESOURCES CORPORATION 401(k) PLAN
Notes to Financial Statements
December 31, 2015 and 2014
I.
|
Reconciliation of Financial Statements to Form 5500
|
The following is a reconciliation
of net assets available for benefits as of December 31, 2014 per the financial statements to the Form 5500:
|
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|
|
|
Net assets available for benefits per the financial statements
|
|
$
|
115,282,403
|
|
Adjustment from contract value to fair value for interest in common collective trust relating to
fully benefit-responsive investment contract
|
|
|
122,961
|
|
|
|
|
|
|
Net assets available for benefits per the Form 5500
|
|
$
|
115,405,364
|
|
|
|
|
|
|
The following is a reconciliation of the net decrease in net assets available for benefits for the years ended
December 31, 2015 and 2014, per the financial statements to the Form 5500:
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
2014
|
|
Net decrease in net assets available for benefits per the financial statements
|
|
$
|
(9,324,571
|
)
|
|
$
|
(8,275,073
|
)
|
Change in adjustment from contract value to fair value for interest in common collective trust
relating to fully benefit-responsive investment contract
|
|
|
(122,961
|
)
|
|
|
7,257
|
|
|
|
|
|
|
|
|
|
|
Net decrease in net assets available for benefits per the Form 5500
|
|
$
|
(9,447,532
|
)
|
|
$
|
(8,267,816
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)
|
|
|
|
|
|
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The reconciling items noted above are due to the difference in the method of accounting used in preparing the
Form 5500 as compared to the Plans financial statements.
Effective January 1, 2016, a newly restated volume submitter
adoption agreement was signed as part of the six-year pre-approved plan document cycle. Under the new adoption agreement, a new advisory letter dated March 31, 2014 was obtained.
F-11