Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

The Company’s current long-term incentive compensation plan was adopted in 2021 and is known as the Tenneco Inc. 2021 Long-Term Incentive Plan (“2021 LTIP”). The types of awards that may be granted under the 2021 LTIP and its predecessor plan are common stock, stock options (both incentive and non-qualified stock options), stock appreciation rights (“SARs”), Full Value Awards (including bonus stock, stock units, restricted stock, restricted stock units (“RSUs”), deferred stock units, performance stock, and performance stock units (“PSUs”)), and cash incentive awards (including long-term performance units (“LTPUs”)).

Under the 2021 LTIP, each share underlying a full value award subsequently issued counts as one share against total plan availability and share-settled awards are settled through the issuance of new shares of Class A Common Stock. At December 31, 2021, up to 2.7 million shares of our common stock remain available for delivery under the 2021 LTIP.

Restricted stock awards are generally granted to directors and vest on the grant date. RSUs (both cash-settled and share-settled) are time-based service awards and generally vest according to a three-year graded vesting schedule. One-third of the award will vest on the first anniversary of the grant date, one-third of the award will vest on the second anniversary, and one-third of the award will vest on the third anniversary. The Company recognizes compensation cost on a straight-line basis for awards with service only conditions that have a graded vesting schedule. PSU (cash-settled and share-settled) awards generally have a three-year performance period and cliff vest at the end of the period based upon achievement of performance targets based upon the Company’s operating performance.

The fair values of restricted stock and RSUs (cash-settled and share-settled) are determined using the average of the high and low trading price of the Company’s common stock on the date of measurement. The fair value of PSUs is determined using the probability weighted factors for performance conditions combined with a Monte Carlo simulation model for market conditions.

Cash-Settled Awards

The Company grants RSUs and PSUs to certain key employees that are payable in cash. These awards are classified as liabilities and are valued based on the fair value of the award at the grant date and are remeasured at each reporting date until settlement with compensation expense being recognized in proportion to the completed requisite period up until the date of settlement. Additionally, compensation expense for PSUs is recognized ratably over the requisite service period if it is probable the performance target related to the PSUs will be achieved and subsequently adjusted if this probability assessment changes. The PSUs have the potential to pay out between zero and 200% based on performance target achievement. Cash-settled share-based compensation expense is included in “Selling, general, and administrative” expenses in the consolidated statements of income (loss).

In the first quarter of 2020, cash-settled LTPUs, with the value of each award based on cash targets, were granted. In the fourth quarter of 2020, the LTPUs were amended whereby the LTPUs were converted to PSUs and are now cash-settled share-based awards. The performance targets for the related modification were approved on February 3, 2021, with the grant date of the modified LTPUs (now PSUs) being the same date.

Total cash-settled share-based compensation expense as well as cash paid for cash-settled awards is as follows:


	Year Ended December 31
	2021		2020		2019
Total compensation expense - cash-settled (net of tax)	$	14	$	2	$	3
Cash paid for cash-settled awards	$	9	$	4	$	7

The following table reflects the number of cash-settled share-based units outstanding:


	December 31
	2021	2020

RSUs	1,451,422	1,878,220
PSUs	2,951,316	—
	4,402,738	1,878,220

At December 31, 2021 and 2020, the liability of all cash-settled RSUs was $6 million and $3 million. The liability of all cash-settled PSUs at December 31, 2021 was $10 million, and there were no outstanding cash-settled PSUs at December 31, 2020.

At December 31, 2021, $30 million in unrecognized costs on the cash-settled awards is expected to be recognized over a weighted average period of approximately two years.

Share-Settled Awards

The Company grants RSUs and PSUs to certain key employees that are payable in common stock. These awards are settled in shares upon vesting, and valued at the grant date fair value with compensation expense being recognized in proportion to the completed requisite period up until the date of settlement. Additionally, compensation expense for PSUs is recognized ratably over the requisite service period if it is probable the performance target related to the PSUs will be achieved and subsequently adjusted if this probability assessment changes. Share-settled share-based compensation expense is included in “Selling, general, and administrative” in the consolidated statements of income (loss).

Total share-settled share-based compensation expense is as follows:


	Year Ended December 31
	2021		2020		2019
Total compensation expense - share-settled (net of tax)	$	18	$	13	$	19

The following table reflects the changes in share-settled RSUs and share-settled PSUs for the twelve months ended December 31, 2021:


	Share-Settled RSUs		Share-Settled PSUs
		Units	Weighted Avg. Grant Date Fair Value		Units	Weighted Avg. Grant Date Fair Value
Nonvested balance at beginning of period		2,118,605	$	26.00	527,105	$	36.37
Granted		2,132,148	10.91		—	—
Vested		(862,999)	31.86		(57,794)	49.18
Forfeited		(270,696)	15.73		(141,015)	46.14
Nonvested balance at end of period		3,117,058	$	13.94	328,296	$	24.72

The following table represents the total fair value of vested restricted stock, vested share-settled RSUs, and vested share-settled PSUs:


	Year Ended December 31
	2021		2020		2019
Restricted stock	$	1	$	4	$	8
Share-settled RSUs	$	15	$	11	$	5
Share-settled PSUs	$	3	$	—	$	—

At December 31, 2021, approximately $18 million of total unrecognized compensation costs is expected to be recognized on the share-settled awards over a weighted average period of approximately two years.