Incentive Stock Plans

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

As of December 31, 2019, the Company had two stock-based incentive plans. The Rayonier Advanced Materials Inc. Incentive Stock Plan (the “Prior Plan”) provided for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock, and restricted stock units, subject to certain limitations. The Company no longer issues shares under the Prior Plan. The Rayonier Advanced Materials Inc. 2017 Incentive Stock Plan (the “2017 Plan”) provides for up to 4.8 million shares to be granted for stock options, non-qualified stock options, stock appreciation rights, performance shares, restricted stock, and restricted stock units. Under the 2017 Plan, shares available for issuance may be increased by any shares of common stock subject to awards under the Prior Plan that, in whole or in part, are forfeited, terminated or expire unexercised, settled in cash in lieu of stock, or released from a reserve for failure to meet the maximum payout under a program. At December 31, 2019, approximately 3.0 million shares were available for future grants under the 2017 Plan.

During the year ended December 31, 2019, the Company made new grants of restricted stock units and performance-based stock units to certain employees. The 2019 restricted stock unit awards vest over three years. The 2019 performance-based stock unit awards are measured against an internal return on an invested capital target and metrics aligned with a weighted average cost of capital. Depending on performance against the targets, the awards will pay out in common stock amounts between 0 and 200 percent of the performance-based stock units awarded. The total number of common stock awards awarded will be adjusted up or down 25 percent, for certain participants, based on stock price performance relative to a peer group over the term of the plan, which could result in a final common stock issuance of 0 to 250 percent of the performance-based stock units awarded. In March 2019, the performance-based share units granted in 2016 were settled at an average of 246 percent of the performance-based stock units awarded, resulting in the issuance of 923,211 shares of common stock.

The Company recognizes stock-based compensation expense on a straight-line basis over the service period of the award. The Company’s total stock-based compensation cost, including allocated amounts, for the years ended December 31, 2019, 2018 and 2017 was $7 million, $13 million and $9 million, respectively. These amounts may not reflect the cost of current or future equity awards.

The Company’s employee stock option compensation program generally provides accelerated vesting (i.e., a waiver of the remaining period of service required to earn an award) for awards held by employees at the time of their retirement. Stock-based compensation expense for stock option awards is recognized over the shorter of: (1) the service period (i.e., the stated period of time required to earn the award); or (2) the period beginning at the start of the service period and ending when an employee first becomes eligible for retirement.

Fair Value Calculations by Award

All restricted stock and performance share awards are presented for Rayonier Advanced Materials stock only. Option awards include Rayonier Advanced Materials awards held by employees of its former parent Rayonier Inc.

Non-Qualified Employee Stock Option Awards

Stock options are granted with an exercise price equal to the market value of the underlying stock on the grant date. They generally vest ratably over three years and have a maximum term of 10 years and two days from the grant date.

The fair value of each option grant is estimated on the grant date using the Black-Scholes option-pricing model. The Company has elected to value each grant in total and recognize the expense for stock options on a straight-line basis over three years. During the years ended December 31, 2019, 2018 and 2017, no options were granted.

A summary of the Company’s stock option activity is presented below for the year ended December 31, 2019:



	Stock Options
	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at January 1, 2019	286,613		$	34.23
Forfeited	—		—
Exercised	—		—
Expired	(81,587	)	29.54
Outstanding at December 31, 2019	205,026		$	36.10	2.4	$	—
Options vested and expected to vest	205,026		$	36.10	2.4	$	—
Options exercisable at December 31, 2019	205,026		$	36.10	2.4	$	—

A summary of additional information pertaining to stock options granted to employees is presented below:



	2019		2018		2017
Intrinsic value of options exercised	$	—	$	108	$	1
Fair value of options vested	$	—	$	—	$	210

Restricted Stock and Stock Unit Awards

Restricted stock and stock units granted in connection with the Company’s performance share plan generally vests upon completion of periods ranging from 1 year to four years. The fair value of each share granted is equal to the share price of the underlying stock on the date of grant. As of December 31, 2019, there was $5 million of unrecognized compensation cost related to the Company’s outstanding restricted stock. This cost is expected to be recognized over a weighted average period of 1.5 years.

The following table summarizes the activity of restricted stock and stock units granted to employees for the three years ended December 31:



	2019		2018		2017
Restricted stock and stock units granted	395,260		301,384		285,506
Weighted average price of restricted stock or units granted	$	11.99	$	19.73	$	13.37
Intrinsic value of restricted stock and units outstanding	$	3,201	$	9,767	$	17,349
Fair value of restricted stock and units vested	$	4,881	$	3,753	$	1,119

A summary of the Company’s restricted stock and stock units activity is presented below for the year ended December 31, 2019:



	Restricted Stock and Stock Units
	Awards		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2019	917,098		$	13.71
Granted	395,260		11.99
Forfeited	(20,014	)	15.06
Vested	(458,748	)	10.64
Outstanding at December 31, 2019	833,596		$	14.55

Performance-Based Stock Unit Awards

The Company’s performance-based stock unit awards generally vest upon completion of a three-year period. The number of shares, if any, that are ultimately awarded is contingent upon the Company’s performance against an internal performance metric or a combination of an internal metric and a market condition.

The performance-based stock unit awards which are measured against a market condition or incorporate market conditions are valued using a Monte Carlo simulation model. The model generates the fair value of the market-based award or market-based portion of the award at the grant date. The related expense is then amortized over the award’s vesting period.

As of December 31, 2019, there was $2 million of unrecognized compensation cost related to the Company’s performance-based stock unit awards. This cost is expected to be recognized over a weighted average period of 1.01 years.

The following table summarizes the activity of the Company’s performance-based stock units awarded to its employees for the three years ended December 31:



	2019		2018		2017
Common shares of stock reserved for performance-based stock units	980,641		1,115,747		896,121
Weighted average fair value of performance-based stock units granted	$	14.98	$	22.75	$	14.60
Intrinsic value of outstanding performance-based stock units	$	4,572	$	4,774	$	7,408

A summary of the Company’s performance-based stock unit award activity is presented below for the year ended December 31, 2019:



	Performance-Based Stock Units
	Awards		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2019	1,325,894		$	14.69
Granted	400,404		14.98
Forfeited	(15,605	)	16.90
Vested	(520,167	)	7.80
Outstanding at December 31, 2019	1,190,526		$	17.77

The expected volatility is based on representative price returns using the stock price of several peer companies. The risk-free rate was based on the 3-year U.S. treasury rate on the date of the award. The following chart provides a tabular overview of the weighted average assumptions used in calculating the fair value of the awards granted for the three years ended December 31:



	2019		2018		2017
Expected volatility	49.5	%	68.7	%	70.2	%
Risk-free rate	2.5	%	2.4	%	1.5	%