Share-Based Compensation

12 Months Ended

Dec. 31, 2021

Share-based Payment Arrangement [Abstract]

Note 20. Share-Based Compensation

Incentive Plans

The Resolute Forest Products Equity Incentive Plan, as amended (or, the “2010 Incentive Plan”), administered by the human resources and compensation/nominating and governance committee of the board of directors, became effective in 2010 and provides for the grant of equity-based and liability-based awards, including stock options, stock appreciation rights, restricted stock, RSUs, DSUs, PSUs (collectively, “stock incentive awards”), and cash incentive awards to certain of our officers, directors, employees, consultants and advisors. The 2010 Incentive Plan reserved for issuance 9 million shares for stock incentive awards. In 2019, we established and adopted the Resolute Forest Products 2019 Equity Incentive Plan (or, the “2019 Incentive Plan”), which authorized 3 million shares to be issued as stock incentive awards. In 2020, an additional 2.3 million shares were authorized, for a total of 5.3 million shares. Since the adoption of the 2019 Incentive Plan, no more awards can be granted. As of December 31, 2021, 1.5 million shares were available for grants under the 2019 Incentive Plan. We refer to both the 2010 Incentive Plan and the 2019 Incentive Plan as the “Incentive Plans”.

Awards for employees who retire (upon meeting certain age and service criteria) at least six months after the grant date and prior to the end of the vesting period will continue to vest after retirement, in accordance with the normal vesting schedule. The requisite service periods for the stock incentive awards are reduced on an individual basis, as necessary, to reflect the grantee’s individual retirement eligibility date.

The share-based compensation expense under the Incentive Plans for the years ended December 31, 2021, 2020 and 2019, was as follows:


		2021		2020		2019
Equity-based awards	$	8	$	4	$	4
Liability-based awards		30		10		(2)
	$	38	$	14	$	2

For the years ended December 2021, 2020 and 2019, we recognized tax benefit of $3.5 million, $1.2 million and nil, respectively. As of December 31, 2021, there was $10 million of unrecognized compensation cost for equity-based awards, which is expected to be recognized over a remaining service period of 2.7 years. For liability-based awards, unrecognized compensation cost as of December 31, 2021, was $11 million, which is expected to be recognized over a remaining service period of 1.9 years.

Stock options

Under the Incentive Plans, stock options become exercisable ratably over a period of four years and, unless terminated earlier in accordance with their terms, expire 10 years from the date of grant. New shares of our common stock are issued upon the exercise of a stock option. In certain cases, we withhold stock options and settle a net amount of shares in respect of stock option costs and applicable taxes. We have not granted any stock options since 2013. Since the adoption of the 2019 Incentive Plan, stock options can no longer be granted.

The activity of outstanding stock options for the year ended December 31, 2021, was as follows:


	Number of Shares	Weighted- Average Exercise Price		Weighted- Average Contractual Life (years)
Balance as of December 31, 2020	912,901	$	16.09	1.8

Exercised	(118,485)		11.80
Forfeited	(151,442)		14.40
Expired	(253,988)		20.76

Balance as of December 31, 2021	388,986	$	15.00	1.7
Exercisable as of December 31, 2021	388,986	$	15.00	1.7

The total intrinsic value of stock options exercised in 2021 was less than $1 million. No stock options were exercised in 2020 and 2019.

Restricted stock units and deferred stock units

Under the Incentive Plans, each RSU and DSU granted provides the holder upon vesting the right to receive one share of our common stock for equity-based awards, and the equivalent in cash for liability-based awards. The awards vest ratably over a period of four years for employees and one year for directors. Awards to employees are settled upon vesting, while awards to directors are settled ratably over a period of three years or upon separation from the board of directors, as applicable, based on the director’s country of residency. We withhold units and settle a net amount of shares in respect of applicable taxes.

The activity of nonvested RSUs and DSUs for the year ended December 31, 2021, was as follows:


	Number of Units
	Equity-Based Awards	Liability-Based Awards	Total	Weighted- Average Fair Value at Grant Date
Balance as of December 31, 2020	1,279,015	1,128,264	2,407,279	$	5.14
Granted	354,311	554,771	909,082	$	10.40
Vested	(750,452)	(747,647)	(1,498,099)	$	6.38
Forfeited	—	(101,457)	(101,457)	$	5.23
Balance as of December 31, 2021	882,874	833,931	1,716,805	$	6.84

There were 169,832 equity-based and 341,651 liability-based RSUs and DSUs granted to directors that vested but were not settled as of December 31, 2021.

The weighted-average grant-date fair value of all RSUs and DSUs granted in 2020 and 2019, was $3.87 and $5.55, respectively. The total fair value of RSUs and DSUs vested in 2021, 2020 and 2019, was $16 million, $7 million and $5 million, respectively, of which $8 million, $3 million and $3 million were related to equity-based awards, respectively, and $8 million, $4 million and $2 million were related to liability-based awards, respectively. We paid $8 million, $3 million and $1 million for liability-based RSUs and DSUs in 2021, 2020 and 2019, respectively.

Performance stock units

Under the Incentive Plans, each PSU provides the holder the right to receive upon vesting one share of our common stock for equity-based awards, and the equivalent in cash for liability-based awards, subject to an adjustment based on market and/or performance conditions. The awards vest after a period of up to 40 months upon which they are settled. No awards vest when

the minimum thresholds are not achieved. We withhold units and settle a net amount of shares in respect of applicable taxes. The fair value of PSUs granted was estimated using a Monte Carlo simulation model, using the following assumptions:


	2021	2020	2019
Expected volatility (1)	76% - 82%	57% - 77%	56% - 58%
Risk-free interest rate	0.06%- 0.96%	0.11% - 2.99%	1.58% - 1.70%

(1)The volatility is based on our historical volatility over the expected remaining life of the award.

The activity of nonvested PSUs for the year ended December 31, 2021, was as follows:


	Number of Units
	Equity-Based Awards	Liability-Based Awards	Total	Weighted- Average Fair Value at Grant Date
Balance as of December 31, 2020	1,795,403	1,311,327	3,106,730	$	6.05
Granted	402,306	333,722	736,028	$	10.60
Vested	(387,616)	(433,418)	(821,034)	$	8.20
Performance adjustment	45,199	52,201	97,400	$	8.58
Forfeited	—	(114,367)	(114,367)	$	5.48
Balance as of December 31, 2021	1,855,292	1,149,465	3,004,757	$	6.69

The weighted-average grant-date fair value of all PSUs granted in 2020 and 2019, was $4.09 and $5.29, respectively. The total fair value of PSUs vested in 2021, 2020 and 2019, was $8 million, $5 million and $7 million, respectively, of which $4 million, $4 million and $6 million were related to equity-based awards, respectively, and $4 million, $1 million and $1 million were related to liability-based awards, respectively. We paid $4 million, $1 million and $1 million for liability-based PSUs in 2021, 2020 and 2019, respectively.

Deferred Compensation Plan

In 2011, the board of directors adopted the Resolute Forest Products Outside Director Deferred Compensation Plan (or, the “Deferred Compensation Plan”), which allows non-employee directors to surrender 50% or 100% of their cash fees in exchange for DSUs or RSUs, as applicable, based on the director’s country of residency. The number of awards issued pursuant to the Deferred Compensation Plan is based on 110% of the fees earned, resulting in a 10% premium incentive.

Under the Deferred Compensation Plan, each RSU and DSU granted provides the holder the right to receive payment in cash in an amount equal to the fair market value of one share of our common stock upon vesting. The awards have a nonforfeitable right or vest ratably over a period of three years, as applicable, and are settled with cash ratably over a period of three years or upon separation from the board of directors, as applicable, based on the director’s country of residency. All of our outstanding stock incentive awards pursuant to the Deferred Compensation Plan were accounted for as liability awards.

Share-based compensation expense under the Deferred Compensation Plan for the years ended December 31, 2021 and 2020, was $5 million and $2 million, respectively. There was a $1 million reversal in share-based compensation expense for the year ended December 31, 2019.

RSUs and DSUs outstanding under the Deferred Compensation Plan as of December 31, 2021 and 2020, were 484,064 and 481,056, respectively. The total fair value of RSUs and DSUs vested in 2021, 2020 and 2019 was $1 million, less than $1 million and less than $1 million, respectively. We paid $1 million for liability-based RSUs and DSUs in 2021. There was no cash paid in 2020 and 2019.