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INCENTIVE PLANS
 12 Months Ended
Dec. 31, 2024
Share-Based Payment Arrangement [Abstract]  
INCENTIVE PLANS INCENTIVE PLANS
The Company has adopted the Sylvamo 2021 Incentive Compensation Plan, which includes shares under its long-term incentive plan (“LTIP”) that grants certain employees, consultants, or non-employee directors of the Company different forms of awards, including time-based and performance-based restricted stock units.
The equity and incentive plan has a maximum shares reserve for the grant of 4,410,725 shares. As of December 31, 2024, 2,564,775 shares remain available for future grants.
The following summarizes restricted stock unit and performance-based restricted stock unit activity for employees:
Restricted Stock UnitsPerformance-Based
Restricted Stock Units
Shares
Weighted
Average Grant
Date Fair Value
Shares
Weighted
Average Grant
Date Fair Value
Outstanding as of December 31, 2021664,569 28.51 — — 
Granted
258,518 39.23 321,271 41.47 
Shares issued
(236,086)28.67 — — 
Forfeited
(36,272)31.36 (16,675)41.47 
Outstanding as of December 31, 2022
650,729 $32.55 304,596 $41.47 
Granted
287,796 47.36 211,791 51.00 
Shares issued
(300,594)31.87 — — 
Forfeited
(10,625)42.94 (8,700)45.76 
Outstanding as of December 31, 2023
627,306 $39.50 507,687 $45.37 
Granted
240,39260.99 189,73466.46 
Shares issued
(385,720)36.06 —— 
Forfeited
(45,471)52.57 (44,853)54.83 
Outstanding as of December 31, 2024
436,507 $53.00 652,568 $50.85 

Restricted stock units generally vest over a period of three years with one-third of the awarded units vesting annually. The grant date fair value of restricted stock units is valued at the closing stock price on the day prior to the grant date. The expense for restricted stock unit awards is recorded, net of forfeitures, over the vesting period.
Performance-based restricted stock units cliff vest at the end of a three-year service period based upon the achievement of two defined performance conditions, Return on Invested Capital (“ROIC”), measured against our internal benchmark, and Total Shareholder Return (“TSR”), compared to a peer group of companies. Expense for performance-based units is recognized, net of forfeitures, over the three-year vesting period. As the ROIC measure contains a performance condition, compensation cost for this component is based upon the grant date fair value of the award and the number of units expected to vest based on performance. As the relative TSR component is a market condition, we utilize a Monte Carlo simulation to determine the grant date fair value and resulting expense to recognize for the units. The Monte Carlo simulation calculates the fair value of the awards on grant date based on the expected term of the award, expected dividends, the risk-free rate and the expected volatility for the Company and its competitors.

The expected term is based on the roughly three-year vesting period of the awards, and the expected dividend yield used is zero as the Company pays dividend equivalent units throughout the performance period. The risk-free rate is based upon the yield of term-matched, zero-coupon securities using the Treasury Constant Maturities yield curve. As Sylvamo did not have sufficient stock price history, the volatility estimate was calculated as a simple average of similar peers and the correlation with the index was calculated as the average index correlation of the peer group.

The Monte Carlo simulation to value the relative TSR share units used the following assumptions:

202420232022
Expected volatility
47.07 %50.03 %49.64 %
Risk-free interest rate
4.36 %4.42 %1.66 %
Total stock-based compensation cost and the associated income tax benefits recognized by the Company in the consolidated statements of operations were as follows:
In millions
202420232022
Total stock-based compensation expense (included in selling and administrative expense)
$23 $23 $20 
Income tax benefit related to stock-based compensation
$8 $7 $5 
As of December 31, 2024, $14 million of compensation cost, net of estimated forfeitures, related to all stock-based compensation arrangements for Company employees had not yet been recognized. This amount will be recognized in expense over a weighted-average period of 1.4 years.