Stock Incentive Plan

12 Months Ended

Dec. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock Incentive Plan

17. Stock Incentive Plan

Eligible employees and non-employee directors of Autoliv participate in the Autoliv, Inc.1997 Stock Incentive Plan (the Plan) and received Autoliv stock-based awards which include stock options (SOs), restricted stock units (RSUs) and performance shares (PSs). In connection with the Veoneer spin-off, each outstanding Autoliv stock-based award as of June 29, 2018 (the Distribution Date) was converted to a stock award that has underlying shares of both Autoliv and Veoneer common shares.

The conversion that occurred on the Distribution Date was based on the following:

• SOs - A number of SOs comprising 50% of the value of the outstanding SOs calculated immediately prior to the spin-off continued to be applicable to Autoliv common stock. A number of SOs comprising the remaining 50% percent of the pre spin-off value were replaced with options to acquire shares of Veoneer common stock.

• RSUs - A number of RSUs comprising 50% of the value of the outstanding RSUs calculated immediately prior to the spin-off continued to be applicable to Autoliv common stock. A number of RSUs comprising the remaining 50% of the pre spin-off value were replaced with RSUs with underlying Veoneer common stock.

• PSs - Outstanding PSs pre spin-off were converted to time-based RSUs and were divided between Autoliv and Veoneer common stock in the same manner as other outstanding RSUs (as described above) on the Distribution Date. The number of outstanding PSs pre spin-off to be converted was determined based on pro-ration of the performance period such as:

1) The level of actual achievement of performance goals for each outstanding PS for the period between the first day of the performance period and December 31, 2017 (the “Performance Measurement Date”), referred to as “Level of Performance-to-Date”; and

2) The greater of the Level of Performance-to-Date and the target performance level for the period between the Performance Measurement Date and the last day of the performance period.

In each case above, the conversion was intended to generally preserve the intrinsic value of the original award determined as of the Distribution Date. The number of converted RSUs and SOs for Autoliv and Veoneer was based on the average of Autoliv closing stock prices for the last 5 trading days prior to the spin-off and the average of closing stock prices of Autoliv and Veoneer, respectively, for the first 5 trading days after the spin-off. Accordingly, 50% of the outstanding awards as of the Distribution Date, and the related exercise price, were converted to Adjusted Autoliv Awards using a conversion factor of 1.41.

As a result of the spin-off and the related conversion, it was determined that the stock based awards were modified in accordance with ASC 718, Compensation – Stock Compensation. The fair value of the RSUs and SOs immediately before and after the modification was assessed in order to determine if the modification resulted in any incremental compensation cost related to the awards, including consideration of the impact of conversion using the 5 trading day average. Based on the valuation performed, it was determined that the conversion did not result in any incremental compensation cost for any of the outstanding awards. The post spin-off stock-based compensation expense will be based on the original grant date fair value related to only Autoliv employees.

With certain limited exceptions, including the freezing of the Performance Measurement Date to December 31, 2017 as noted above, the adjusted SOs and RSUs outstanding after the spin-off are subject to the same terms and conditions (including with respect to vesting and expiration) that were applicable to such Autoliv stock-based awards immediately prior to the conversion and as described below.

The fair value of the RSUs and PSs is calculated as the grant date fair value of the shares expected to be issued. The RSUs granted in 2018 and 2017 entitle the grantee to receive dividend equivalents in the form of additional RSUs subject to the same vesting conditions as the underlying RSUs. The RSUs granted prior to 2017 do not have dividend equivalent rights. For the grants made during 2018 and 2017, the fair value of a PS and a RSU was calculated by using the closing stock price on the grant date. For the grants made during 2016 and earlier, the fair value of a RSU and a PS was estimated using the Black Scholes valuation model to account for the difference in the value of the awards resulting from such awards not having dividend equivalent rights. The grant date fair value for the RSUs on February 13, 2018 was $16.6 million (pre-spin grant date fair value). The amount of this cost attributable to Autoliv employees after the spin-off will be amortized straight line over the vesting period.

Pursuant to the Company’s director compensation policy, the Company’s non-employee directors receive RSUs as payment of 50% of their annual base retainer, which RSUs vest in one installment on the earlier of the date of the next AGM or the first anniversary of the grant date, in each case subject to the grantee’s continued service as a non-employee director on the vesting date with certain exceptions. The RSUs granted to the Company’s non-employee directors entitle the grantee to receive dividend equivalents in the form of additional RSUs subject to the same vesting conditions as the underlying RSUs. The grant date fair value for the RSUs granted in 2018 to the Company’s non-employee directors was $1.4 million.

The source of the shares issued upon vesting of awards is generally from treasury shares. The Stock Incentive Plan provides for the issuance of up to 9,585,055 common shares for awards. At December 31, 2018, 6,394,392 of these shares have been issued for awards which includes 37,103 shares of common stock issued to non-executive directors in satisfaction of all or a portion of his or her annual base retainer for service on the Board. Included within the RSUs granted in 2018 are 7,869 RSUs issued to non employee directors in satisfaction of all or a portion of his or her annual base retainer for service on the Board.

During 2015 and earlier, stock awards were granted in the form of SOs and RSUs. All SOs were granted for 10-year terms, had an exercise price equal to the fair value of the share at the date of grant, and became exercisable after one year of continued employment following the grant date. The average grant date fair values of SOs were calculated using the Black-Scholes valuation model. The Company used historical exercise data for determining the expected life assumption. Expected volatility was based on historical and implied volatility.

The Company recorded $9.1 million, $6.1 million and $8.4 million stock-based compensation expense in continuing operations related to RSUs and PSs for 2018, 2017 and 2016, respectively. The total compensation cost related to non-vested awards not yet recognized is $10.3 million for RSUs and the weighted average period over which this cost is expected to be recognized is approximately 1.7 years. There are no remaining unrecognized compensation costs associated with stock options.

Information on the number of RSUs, PSs and SOs related to the Stock Incentive Plan during the period of 2016 to 2018 is as follows.

RSUs	2018			2017			2016
Weighted average fair value at grant date 1)	$	131.51		$	105.64		$	100.77
Outstanding at beginning of year		188,410			188,494			204,552
Granted		131,246			84,771			71,870
Shares issued		(84,425	)		(70,795	)		(66,651	)
Cancelled/Forfeited/Expired		(6,485	)		(14,060	)		(21,277	)
Spin conversion 2)		33,328			—			—
Outstanding at end of year3)		262,074			188,410			188,494

¹⁾ Weighted average fair value at grant date pre-spin.

²⁾ Reflects the impact of the cancellation of PS awards outstanding as of the Distribution Date, and the conversion to RSUs in accordance with the conversion factor described above.

³⁾ Outstanding at the end of 2018 reflects the RSUs held by employees of Autoliv and Veoneer, in accordance with the conversion factor described above. Outstanding at the end of 2017 and 2016, respectively reflects RSUs held by employees of Autoliv. The corresponding weighted average grant date fair value after applying the conversion factor is $100.74 as of December 31, 2018.

The aggregate intrinsic value for RSUs outstanding at December 31, 2018 was $18.4 million.

PSs	2018			2017			2016
Weighted average fair value at grant date 1)	$	105.87		$	105.87		$	98.57
Outstanding at beginning of year		139,891			138,548			—
Change in performance conditions		—			(69,274	)		—
Granted 2)		588			75,379			143,740
Shares issued		—			—			—
Cancelled/Forfeited/Expired		(3,076	)		(4,762	)		(5,192	)
Spin conversion 3)		(137,403	)		—			—
Outstanding at end of year 4)		—			139,891			138,548

¹⁾ Weighted average fair value at grant date pre-spin.

²⁾ 2018 grants reflect awards issued pre-spin as a result of dividend equivalent rights.

³⁾ Reflects the replacement of awards due to the spin-off. Outstanding PS awards were converted to RSU awards in accordance with the conversion factor described above.

⁴⁾ Outstanding at the end of 2017 and 2016, respectively reflects PSs held by employees of Autoliv.

The PSs granted include assumptions regarding the ultimate number of shares that will be issued based on the probability of achievement of the performance conditions. Changes in those assumptions result in changes in the estimated shares to be issued which is reflected in the “Change in performance conditions” line above. 

SOs	Number of options			Weighted average exercise price
Outstanding at Dec 31, 2015		473,051		$	87.88
Exercised		(51,084	)		88.10
Cancelled/Forfeited/Expired		(10,858	)		102.31
Outstanding at Dec 31, 2016		411,109		$	87.47
Exercised		(100,184	)		79.58
Cancelled/Forfeited/Expired		(10,976	)		112.20
Outstanding at Dec 31, 2017		299,949		$	89.20
Exercised		(92,485	)		86.59
Cancelled/Forfeited/Expired		—			—
Spin conversion 1)		(65,390	)		88.75
Outstanding at Dec 31, 2018 2)		142,074		$	63.43
OPTIONS EXERCISABLE
At December 31, 2016		254,842		$	71.48
At December 31, 2017		299,949		$	89.20
At December 31, 2018		142,074		$	63.43

¹⁾ Reflects the cancellation of SOs outstanding as of the Distribution Date, and the conversion to new awards in accordance with the conversion factor described above. The weighted average exercise price reflects the exercise price of the shares cancelled due to the spin-off.

²⁾ Reflects outstanding SOs held by employees of Autoliv and Veoneer at the end of the year and the weighted average exercise price, in accordance with the conversion factor described above.

The following summarizes information about SOs outstanding and exercisable at December 31, 2018:

RANGE OF EXERCISE PRICES	Number outstanding & exercisable		Remaining contract life (in years)		Weighted average exercise price
$11.57		5,885		0.14	$	11.57
$31.71		7,047		1.13		31.71
$47.52– $49.07		27,553		3.64		48.30
$51.74		10,120		2.15		51.74
$67.29		37,768		5.14		67.29
$80.40		53,701		6.13		80.40
		142,074		4.64	$	63.43

The total aggregate intrinsic value, which is the difference between the exercise price and $70.23 (closing price per share at December 31, 2018), for all “in the money” SOs, both outstanding and exercisable as of December 31, 2018, was $10.0 million.